GDP
This GDP component includes business spending on capital goods, residential construction, and changes in inventories.
Investment
This economic theory, associated with Thomas Malthus, predicted that any gains in real GDP per person would be temporary because population growth would always pull living standards back down to the subsistence level.
Classical (Malthusian) Growth Theory
In 2011, the Bureau of Labor Statistics (BLS) announced that of all adult Americans, 139,869,000 were employed, 13,747,000 were unemployed, and 86,001,000 were not in the labor force. Calculate:
adult population
size of the labor force
Labor-force participation rate
Unemployment rate
adult population - 239,617,000
size of the labor force - 153,616,000
Labor-force participation rate – 64.1 %
Unemployment rate – 8.9 %
The official unemployment rate is often criticized for understating the true health of the labor market. Name 1 group of people who are NOT counted as unemployed in the official U-3 rate, and explain why their exclusion matters.
1) Discouraged workers
The government builds a new national highway system, increasing the stock of physical capital per worker.
Movement along
This adjustment is made in GDP to account for goods produced domestically but sold abroad, minus goods produced abroad but purchased domestically.
Net Exports (exports - imports)
According to the aggregate production function
Y = f(L, H, K), these are the three inputs that determine a country's output.
Labor (L), Human Capital (H), and Physical Capital (K)
(Raw Materials, Land, Energy)
What is 1 pro and 1 con of unions?
Open Ended
The 2024 Nobel Prize in Economics was awarded to Acemoglu, Johnson, and Robinson for showing that countries colonized when they were initially poorest ended up with inclusive institutions that promoted long-run prosperity, while formerly rich colonies ended up with extractive ones. This historical reversal is called....
Scientists develop a new AI-assisted manufacturing process that lets workers produce more output with the same machines.
Shift upward
Technological progress means the same capital per worker now produces more output
When nominal GDP rises, but real GDP stays the same, economists conclude this has occurred.
Inflation (increase in the price level)
This economic phenomenon explains why South Korea's GDP grew by a factor of 12 from 1970–2000 after investing in physical capital, while the U.S. saw far less impressive growth from a similar dollar increase in capital.
Catch up growth
why?
Diminishing returns to capital
If many unemployed people from the US decide to stop looking for work (it's been over 4 weeks), what happens to the unemployment rate?
decreases
Ex.
LF = 100 LF 2: 80
Un = 40 Un2: 20
40% 25%
Consider an economy with two labor markets: one for manufacturing workers and one for service workers. Suppose initially that neither is unionized.
Which of the following will happen to the manufacturing labor market if manufacturing workers formed a union? (select all that are true)
a. The wage of manufacturing workers will fall.
b. The demand for manufacturing workers will remain unchanged.
c. The supply of manufacturing workers will increase.
d. Some manufacturing workers will become unemployed.
b. The demand for manufacturing workers will remain unchanged.
d. Some manufacturing workers will become unemployed.
A baby boom 20 years ago means there are now more workers entering the labor force.
movement along
Which of the following is not included in GDP? (select all that are not included)
a. buying a house
b. social security payments
c. investments in the stock market
d. purchasing an apple
b. social security payments
c. investments in the stock market
Unlike physical capital, this type of growth driver does not depreciate with use, can be freely shared across millions of people, and may even promote additional discoveries — making it the key to sustained long-run economic growth.
Technological advancement
Economists say the economy can be at 'full employment' even when the unemployment rate is above zero... how can this be?
Structural and frictional unemployment are always present.
When I graduate this spring and am searching for a job, what type of unemployment is this?
frictional
Companies invest heavily in employee training programs, raising the average skill level of the workforce.
shift upward
year 2022:
good 1: Q = 20 P = $5
good 2: Q = 25 P = $3
year 2023
good 1: Q = 20 P = $7
good 2: Q = 25 P = 5
Calculate Nominal and Real GDP in 2022 and 2023 with 2022 as your base year.
2022: Nominal & Real = $175
2023: Nominal = 265 Real = $175
This principle states that if ALL inputs in the production function are increased by the same proportion, output will increase by that same proportion — for example, doubling every input doubles output.
Constant Returns to Scale
A car factory worker loses her job after a robot is installed to do her task. A coal miner loses his job as the economy shifts to natural gas. Identify the TYPE of unemployment each person is experiencing
Both are structural
How can someone be a part of the working age population, not have a job, but not be considered unemployed?
They are a discourgaed worker
The economy of Hawkeyeland is on its production function. A student claims the following events all "shift the production function up." Identify which ones they got wrong.
(A) Hawkeyeland's firms purchase a large number of new computers and machinery for their workers.
(B) A major university in Hawkeyeland discovers a new, more efficient process for producing solar panels — and publishes it openly so any firm can use it.
(C) A nationwide apprenticeship program trains 500,000 workers in advanced manufacturing skills.
(D) An economic boom causes workers to put in more hours per week, raising total output.
A - Wrong
D - Wrong