Gross Domestic Product (GDP)
What does GDP stand for?
What is Gross Domestic Product?
What are the four types of unemployment?
What are frictional, structural, cyclical, and seasonal unemployment?
What is inflation?
What is the sustained increase in the general price level of goods and services over time?
What are the four phases of a business cycle, in order?
What are expansion, peak, contraction, and trough?
How does the Classical model view the economy?
What is that the economy is self-correcting, and markets will naturally return to equilibrium without government intervention?
What are the two methods for calculating GDP?
What are the expenditure approach and the income approach?
When is an individual considered unemployed?
What is when they are actively seeking work but cannot find a job?
How do you calculate the rate of inflation given the CPI in two different years?
What is by subtracting the CPI of the previous year from the CPI of the current year, dividing by the CPI of the previous year, and multiplying by 100?
Why is aggregate demand downward-sloping?
What is because as the price level decreases, the real value of money increases, leading to higher consumption and investment?
How do monetarists believe inflation is controlled?
What is by controlling the money supply to prevent excessive inflation and economic instability?
What 3 parameters do we use to measure GDP?
Within a timeframe
Within a country
On final goods and services
How is the unemployment rate (U-3) calculated?
What is by dividing the number of unemployed people by the labor force and multiplying by 100?
What are some of the measurement problems with the CPI?
What are substitution bias, changes in quality, and the introduction of new products that the CPI may not account for?
What factors can shift aggregate demand?
What are changes in consumer confidence, interest rates, government spending, and net exports?
How do supply-side economists propose solving economic problems?
What is by reducing taxes and regulations to encourage production and economic growth?
How does nominal GDP differ from real GDP?
What is nominal GDP is measured using current prices, while real GDP adjusts for inflation by using constant prices from a base year?
What are the costs of high unemployment?
What are reduced output, lower income, social costs (increased crime and mental health issues), and a loss of skills among the workforce?
What are the costs of high inflation?
What are the eroding purchasing power, distortion of savings and investment decisions, uncertainty, and redistribution of wealth?
What does the long-run aggregate supply (LRAS) curve look like, and what causes it to shift?
What is the LRAS curve is vertical at the full employment level, and it shifts due to changes in factors such as technology, resources, or labor force size?
What are the main ideas of Keynesian economics?
What is that government intervention, particularly in the form of fiscal policy (spending and taxation), is necessary to manage economic fluctuations?
How do you calculate nominal GDP? How do you calculate real GDP?
What is nominal GDP is calculated by multiplying the current year's prices by the current year's quantities, while real GDP uses the prices from a base year and the current year's quantities to adjust for inflation?
What is the difference between full employment and the natural rate of unemployment?
What is full employment occurs when the economy is operating at its potential output, and the natural rate of unemployment is the lowest unemployment rate that doesn't cause inflation, including frictional and structural unemployment?
What is the difference between nominal income and real income?
What is nominal income is the income measured in current dollars, while real income adjusts for inflation to reflect the actual purchasing power?
How do shifts in aggregate demand and aggregate supply contribute to the fluctuations in the business cycle?
What is when aggregate demand increases, it can lead to economic expansion and inflation, while a decrease in aggregate demand can result in a recession.
What does Okun’s Law describe?
What is the relationship between unemployment and GDP, stating that for every 1% increase in the unemployment rate, GDP will be roughly an additional 2% lower?