question
define GDP
answer
(gross domestic product) the total market value of all final goods and services produced anually within the boundaries of the U.S., whether by U.S. or foreign-supplied resources
question
how do you calculate aggregate spending (GDP)?
answer
Consumption+Investment+Government spending+ (Exports-Imports)
question
what is included in GDP?
answer
final goods
question
What is excluded in GDP?
answer
intermediate goods, second-hand sales, nonmarket transactions, underground economy transactions
question
what is nominal GDP?
answer
the value of current production at the current prices.
question
what is real GDP?
answer
the value of current production, but using prices form a fixed point in time
question
How do you calculate CPI?
answer
(market basket in the year you are looking for / market basket for base year) X100
question
How do you calculate the deflator?
answer
(nominal GDP/real GDP) x100
question
what is an expansion in a business cycle?
answer
a period where real GDP is growing.
question
what is a peak in a business cycle
answer
the top the cycle where an expansion has run its course and is about to turn down.
question
what is a contraction on a business cycle?
answer
A period where real GDP is falling
question
what is a recession?
answer
two consecutive quarters of a falling GDP
question
what is a depression?
answer
a prolonged contraction.
question
what is a trough in a business cycle?
answer
the bottom of the cycle where a contraction has stopped and is about to turn up.
question
what is the BLS?
answer
bureau of labor statistics
question
what does the BLS do?
answer
determines the number of employed/unemployed citizens
question
what is CPI?
answer
(consumer price index) measures the average price level of items that consumers actually buy.
question
who benefits from inflation and who is hurt by it?
answer
people who have borrowed money benefit from inflation. consumers are hurt by inflation causing a rise in prices.
question
what is COLA?
answer
(cost of living adjustment) an annual adjustment to a salary so that the purchasing power of that income remains constant. this adjustment is typically based upon change in CPI.
question
how do you calculate nominal interest rate?
answer
real interest rate+ expected inflation
question
who is in the labor force?
answer
everyone that is 16 and older, not in the military or in prison, who are either currently employed, unemployed
question
who is out of the labor force?
answer
those under 16, retirees, people who are not actively searching for work, and discouraged workers.
question
how do you calculate the unemployment rate?
answer
(unemployed/labor force) x100
question
what does it mean to be considered unemployed by the BLS?
answer
you are actively searching for a work.
question
what is a discouraged worker?
answer
citizens who have been without work for so long that they become tired of looking for work and drop out of the labor force.
question
what is frictional unemployment?
answer
someone is in between jobs
question
what is seasonal unemployment?
answer
unemployment that emerges periodically throughout the calender/seasons
question
what is structural unemployment?
answer
caused by fundamental underlying changes in the economy that creates job loss for skills that are no longer needed.
question
what is cyclical unemployment?
answer
jobs are gained and lost as the business cycle improves or worsens
question
What is FE?
answer
(full employment) a situation where there is no cyclical unemployment.
question
What is the NRU?
answer
(natural rate of unemployment) 4-6%
question
what is marginal propensity to consume?
answer
the change in consumption caused by a change disposable income, or the slope of the consumption function: Δc/ΔDI
question
how do you calculate Marginal propensity to consume?
answer
Δconsumption/Δdisposable income
question
what is marginal Propensity to save?
answer
the change in saving caused by a change in disposable income
question
how do you calculate Marginal propensity to save?
answer
Δsavings/Δdisposable income
question
how do you calculate disposable income?
answer
gross income-net taxes
question
how do you calculate the multiplier using MPS?
answer
1/MPS
question
how do you calculate the multiplier using MPC?
answer
1/(1-MPC)
question
how do you calculate the multiplier using the GDP?
answer
(ΔGDP)/(Δ spending)
question
what is a spending multiplier?
answer
the magnitude of the effect that a change in taxes has on real GDP
question
What does aggregate demand measure?
answer
the some of consumption spending by households, investment spending by firms, government purchases, and net exports
question
what are the components of AD?
answer
C+I+G+Xn
question
what are some shifters of AD?
answer
change in consumer spending, investment spending, government spending, or change in exports/imports
question
what is LRAS?
answer
long run aggregate supply
question
what are some shifters of AS?
answer
changes in Input prices, taxes, deregulation, political and environmental phenomena
question
what does it mean to be at a macroeconomic equilibrium?
answer
the quantity of real output demanded is equal to the quantity of real output supplied.
question
what is a recessionary gap?
answer
the amount by which full-employment GDP exceeds equilibrium GDP
question
what is an inflationary gap?
answer
the amount by which equilibrium GDP exceeds full-employment GDP
question
what is deflation?
answer
a sustained falling price level, usually due to severely weakened aggregate demand and a constant SRAS
question
what is stagflation?
answer
a situation in the macroeconomy when inflation and the unemployment rate are both increasing. this is most likely the cause of a falling SRAS while AD stays constant.
question
what is disinflation?
answer
reduction in the rate of inflation
question
what are sticky prices?
answer
if price levels do not change, especially downward, with changes in AD, then prices are thought of as sticky.
question
what is fiscal policy?
answer
deliberate changes in government spending and net tax collection to affect economic output, unemployment, and the price level
question
what is expansionary fiscal policy?
answer
increases in government spending or lower net taxes meant to shift the aggregate expenditure function up and shift AD to the right.
question
what is contractionary fiscal policy?
answer
decreases in government spending or higher net taxes meant to shift AE downward and shift AD to the left.
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