Whole Class
Define GDP
The dollar value of all final goods and services produced within a country in one year
Define GDP per Capita
GDP divided by the population
What is one segment of the economy that is present but is not captured in GDP?
Non-market transactions
Ex. Illegal activity and household production
This kind of employment occurs when workers lose their jobs due to a lack of skills or automation takeover
Structural
True of False: A limitation of GDP is that it does not account for the distribution of income among citizens
True
When people lose their jobs to due to a downturn the economy is defined as what?
Cyclical Unemployment
Who supplies resources in the resource market according to the circular flow model?
individuals and businesses
Why does GDP need to be adjusted based on each different country?
Needs to be adjusted to reflect the size of the nation's population
When the rising general level of prices reduces a currencies purchasing power
Inflation
Who is typically hurt by unanticipated inflation?
Lenders
** Because if the interest rate is not high enough to charge a customer, the dollars loaned out will be worth less coming back **
Tell me the full equation of the Expenditure Approach for calculating GDP
GDP (Y) = C + I + G + (X - M)
When you have frictional plus structural unemployment when the economy is healthy and growing is defined as what?
The Natural Rate of Unemployment
What can happen in an economy that has too little unemployment?
consumer prices will start to rise since consumers spend more and producers bid up the price of resources as more people are making money working and spending that money
Assume that the CPI in 2010 is 100 and the CPI in the current year is 130, what is the inflation rate between these two years?
30%
Real = GDP adjusted for inflation
Nominal = GDP measured in the current year, not accounted for inflation
REAL GDP!
Tell me the equation of % change in GDP
Year 2 - Year 1 (base year)
_________________________ X 100
Year 1 (base year)
Tell me the equation for Unemployment Rate
# of unemployed people
____________________ X 100
# in the labor force
Tell me the major difference between the GDP Deflator and CPI
The GDP deflator measures the prices of all goods produced, whereas the CPI measures prices of only the goods and services bought by consumers (a specific market basket)
Tell me the 4 phases of the business cycle
Expansion, Peak, Contraction, Trough
Define a recession according to the business cycle model
6 consecutive months of a decline in real GDP
Give me the equation for the GDP Deflator
Nominal GDP
___________ X 100
Real GDP