Definitions
What is the dollar value of all final goods and services produced within a country's borders in one year?
GDP
GDP formula
GDP = C + I + G + Xm
Sally just lost her job and is actively looking for a new job. What type of unemployment is she experiencing?
Frictional unemployment
deflation
A decrease in the general price level
The nominal GDP is $100 billion and the real GDP is $80 billion. Calculate the GDP deflator.
125
GDP adjusted for inflation
Real GDP
Income approach formula
National Income = W + R + i + PR
What type of unemployment is caused by a recession?
Cyclical unemployment
what is it called when prices are going up, but not as fast as before?
disinflation
The nominal GDP is $300 billion and the deflator is 150. Calculate the real GDP?
$200 billion
GDP measured in current prices
Nominal GDP
Unemployment rate formula
unemployment rate = (# unemployed / labor force ) x 100
What is the natural rate of employment?
The amount of unemployment that exists when the economy is healthy
What usually occurs after the government prints money to pay citizens and pay off debts
Hyperinflation
The nominal GDP is $100 billion and the deflator is 125. Calculate the real GDP
$80 billion
What approach adds up all the spending done in the economy by households, businesses, the government, and other countries?
The expenditures approach
CPI formula
Why is there still unemployment when the economy is at full employment?
Because of frictional unemployment
What type of inflation occurs in an overheated economy with excessive spending but the same amount of goods?
Demand-pull inflation
The real GDP is $100 billion and the GDP deflator is 200. Calculate the nominal GDP.
$200 billion
What approach adds up all income earned in the economy including wages, rent, interest, and profit?
The income approach
M x V = P x Q
What type of worker wants more hours but isn't able to get them?
An underemployed worker
What is cost-push inflation?
The result of a negative supply shock that increases the costs of production and forces producers to increase prices
The real GDP is $200 billion and the GDP deflator is 120. Calculate the nominal GDP.
$240 billion