Chapter 8 Vocab
Define GDP
The market value of all final goods and services produced in a country during a period of time, typically one year
What is the Labor Force?
The sum of employed and unemployed workers in an economy
What is long-run economic growth?
The process by which rising productivity increases the standard of living?
Name one of the four components in aggregate expenditure.
Consumption, planned investment, government purchases, and net exports
What is the formula for the rule of 70?
70/growth rate
What are transfer payments?
Payments by the government to households for which the government for which the govt does not receive a new good or service in return
What are discouraged workers?
People who are available for work but have not looked for a job during the previous four weeks because they believe no jobs are available for them.
Name a factor that affects labor productivity growth.
Increase in capital per hour worked, technological change, property rights
What is the aggregate expenditure model?
A macroeconomic model that focuses on the short-run relationship between total spending and real GDP, assuming that the price level is constant.
What is the formula for the change in CPI/inflation?
(current year CPI-base year CPI/base year CPI)*100
What is Investment?
Spending by firms on new factories, office buildings, machinery, and additions to inventories, plus spending by households and firms on new houses.
What is frictional unemployment?
Short-term unemployment that arises from the process of matching workers with jobs.
What is potential GDP?
The level of real GDP attained when all firms are operating at capacity.
BONUS: What does capacity refer to?
Name one of the determinants of consumption.
Current disposable income, household wealth, expected future income, the price level, and the interest rate
What is the formula for GDP?
C+I+G+NX
What is the underground economy?
Buying and selling of goods and services that is concealed from the government to avoid taxes or regulations, or because the goods and services are illegal.
Name one government policy that increases unemployment.
Unemployment insurance, minimum wage laws, labor unions, efficiency wages
Name of the three key services of the financial system.
Risk sharing, liquidity, information
Name one of the determinants of planned investment.
Expectations of future profitability, the interest rate, taxes, cash flow
What is the formula for CPI?
(Expenditures in the current year/expenditures in the base year)*100
What is GNP? (Gross National Product)
Production performed by citizens of a nation, including overseas production.
What is CPI? (Consumer Price Index)
A measure of the average of the prices a typical urban family of four pays for the goods and services they purchase.
What is the market for loanable funds?
What is the paradox of thrift?
What appears to be favorable in the long-run may be counterproductive in the short-run.
What is the formula for total saving?
Y-C-G