Economic Growth
Recessions and Expansions
Unemployment
Inflation + Trade
Inflation + Aggregation
GDP
Expenditures
Investment
Indices
Economic Growth
Financial Institutions
Savings and Investment 1
Savings and Investment 2
100

What does per capita mean?

per head

100

The rate of US economic growth is steady/unsteady?

instead

100

What is unemployment rate?

percentage of the labor force that is looking for a job but can't find one 

100

What is inflation?

general price level rises 

100

When has inflation been high in US history? x3

WW1, WW2, 1970s 

100

What are capital goods?

long-lived goods that are used to produce other goods 

100

Kuznets pointed out that this good can be viewed as an intermediate good

national defense 

100

What is residential fixed investment?

purchase of new homes 

100

The CPI usually understates/overstates inflation

overstates

100

When did sustained economic growth begin in the US and W Europe?

two centuries ago 

100

What is savings?

people have more money than they want to spend so they put it somewhere 

100

In a closed economy how are savings and investment related?

S=I

100
How are S and I related in an open economy?

S = I + NCO

200

What is output per person called?

GDP per capita

200
The most major decline of output in US history

The Great Depression 

200

Who makes up the labor force?

employed + unemployed 

200

Inflation increases/reduces purchasing power.

reduces 

200

Since the early ___, inflation has been low.

1980s

200

Are capital goods counted in GDP?

yes but only in the year they're produced 
200

T/F: Services such as housekeeping and childcare are bot counted in GDP.

true

200

What are inventories?

addition of unsold goods to business inventories 

200

What 3 factors cause CPI to overstate inflation?

substitution bias

unmeasured quality change

new goods and services 

200

When did sustained economic growth begin in Japan and L America?

late 1800s 

200

What is investment?

the purchase of new capital equipment 

200

What is the equation for private saving?

Y - C - T
200

What is savings in terms of Y, C, and G?

S = Y - C - G

300
GDP per capita and quality of life measurements are ___ly correlated 

positively 

300

The sharpest increase in economic output in US history

WW2

300

When the unemployment rate is up it's easier/harder to find work

harder

300

Inflation makes people better/worse off

worse 

300

Trade deficit

imports > exports 

300

GDP only counts goods produced where?

within the borders of a country 

300

What demographic has increasingly entered the labor force in recent years?

women 

300

What is government purchases?

all the goods and services purchased by all levels of government 

300

CPI overstates the cost of living by __%

1.3 

300

What does the circular flow model trace?

the flow of dollars through the economy

300

What is the role of financial institutions?

coordinates saving and investment 

300

What is the equation for government saving?

T - G

300

What determines the rate of savings in the economy?

real interest rate 

400
Since 1900, the US economy has grown by a factor of __.

32

400
What is a peak?
the most economic activity in a business cycle
400

When unemployment is high it's easier/harder to get a promotion

harder

400
One goal of economic policy is to keep inflation high/low

low

400

Trade surplus

exports > imports 
400

T/F: foreign-owned companies that produce goods in the US are counted in US GDP.

true 

400

Economists divide purchasers into four categories:

household, firms, governments, foreign sector 

400

What kind of payments are not counted in G?

transfer payments 

400

Who calculated the amount CPI overstates inflation by?

Michael Boskin 

400

What are the 3 major actors in a domestic economy?

households, firms, government 

400

What are bonds?

company borrows directly from the public 

400

During a budget surplus, what is true about T - G?

it's positive 

400

People save more when the interest rate is higher/lower

higher 

500

When was the Great Depression?

1929 to 1933

500

What is a trough?

The least economic activity in the business cycle. 

500

During a recession what happens to unemployment?

increases

500

Inflation has been low since what decade?

1980s

500

The US ran a trade surplus until what decade?

1950s

500

Economists make GDP calculations for what two time contexts?

annually, quarterly 

500

Since goods that are produced are always purchased, we can also think of GDP as the sum of __

expenditures 

500

What equals exports - imports?

net exports 

500

What is the GDP deflator equation?

100 * nominal GDP / real GDP

500

What measures output but is not affected by population?

GDP per capita 

500

What are stocks?

the public invests in a company 

500

During a budget deficit, what is true about T - G?

it's negative 

500

What is the principal motive for saving?

more consumption in the future

600

When was the American involvement in WW2?

1941-1945

600

What is an expansion?

period between a trough and peak 

600

During an expansion what does unemployment do?

decreases 

600

Prices have risen slowly but consistently since what decade?

1940s 

600

The US has run a trade deficit since what decade?

1970s

600

Although the sale of an old house doesn't count in GDP, the realtor's __ does count.

commission 

600

Household purchases are called what?

consumption 

600

What is the equation for GDP?

Y = C + I + G + NX

600

What's less volatile: CPI or GDP deflator?

GDP deflator 

600

How are GDP per capita and GDP per worker related? 

GDP per capita = GDP per worker * labor force participation rate 

600
Equity financing – is that stocks or bonds?

stocks 

600

When a government runs a deficit it __ investment in the economy.

reduces 

600

Low interest rate and __ can discourage savings

expected inflation 

700

During WW2, the American economy's production did what?

increased

700

What is a recession?

period between a peak and trough 

700

Why does the unemployment rate never reach 0?

there's always people looking for a new job

700

What links national economies together?

international trade 

700

What is the combination of many things into one economic variable?

aggregation 

700

When was GDP first developed?

1930s 

700
What are the 3 categories of household purchases?

consumer durables

consumer nondurables

services

700

What is the identity equation for GDP?

GDP = production = expenditures = income 

700

Why is the GDP deflator less volatile?

it only measures domestic goods 

700

Variation in GDP per capita is mainly due to what?

differences in average labor productivity 

700

Are stocks or bonds more risky?

stocks 

700

What is net capital outflow?

sale of domestic goods to foreigners - purchase of foreign goods by citizens

700

Why do business invest?

they think that spending money on equipment now will increase revenue in the future

800

During the Great Depression the US economy's production did what?

decreased

800

What is a depression?

a severe recession

800

Is unemployment increasing in the long run in the US?

no

800

What is a trade surplus?

exports > imports 

800
Aggregates are important in what branch of economics?

macroeconomics 

800

Who made the first proto-GDP system?

Sir William Petty

800

What category does buying a new house fall under?

investment 

800

What is nominal GDP?

GDP calculated in current year prices 

800
How many households does the BLS survey for the unemployment rate?

60 000 

800

Why has US labor force participation rate recently increased?

more women in the workforce, less kids 

800

What are financial intermediaries?

a third party who links the money from one person to another

800

If a British company purchases an American one, what happens to NCO?

decreases

800

New tech causes the demand for savings to increase/decrease.

increase 

900

In the grand scale, do short-run fluctuations matter?

no

900

What is the business cycle?

Alternation of expansions and recessions 

900

What is cyclical unemployment?

unemployment due to the business cycle 

900

What is a trade deficit?

exports < imports 

900

What is "the market value of all final goods and services produced in a country during a specific period of time"

GDP
900

When did Sir Petty make his system?

mid-1600s 

900

What are two examples of consumer nondurables?

food, clothing 

900

What is real GDP?

GDP calculated with a base year prices 

900

What is US labor force participation rate (roughly)?

66%

900

Why has the US labor force participation rate decreased recently?

longer education, earlier retirement 

900

How do banks work?

people deposit money and the bank lends some of that money to other people

900

If Intel builds a factory in Taiwan, what happens to NCO?

increases 

900

The government running a deficit makes the quantity of savings increase/decrease

decrease 

1000

One common reason for rising levels of production is

increases in population

1000

During a recession what do employment and inflation do?

both decrease

1000

What is frictional unemployment?

unemployed people who are looking for jobs and will get one quick

1000

Levels of import and exports move in the same/different directions.

Same 

1000

Goods that have higher prices should contribute more/less to total output

more

1000

What economist made the first GDP formula?

Simon Kuznets 

1000

Name 3 types of services

education

legal

financial 

1000

How often is CPI calculated?

every month 

1000

What demographic has the lowest employment?

teenagers 

1000

What 5 things affect average labor productivity?

physical capital, human capital, natural resources, tech knowledge, political/legal context

1000

What are mutual funds?

people invest in a porfolio of stocks/bonds managed by a professional

1000

What are the two types of NCO?

foreign direct investment, portfolio investment

1000

What is crowding out?

government borrowing a lot of money causes private investment to decrease

1100

The US population has increased by a factor of __ since 1900

4
1100

What fiscal policy can fix a recession?

lower taxes / higher government spending 

1100

What is structural unemployment?

a mismatch between worker's skills and what employers need 

1100

International trade makes every participant what?

better off

1100

Goods that are used up in the production of a final good.

intermediate goods

1100

When did Kuznets make his system?

1932

1100

spending by firms on final goods and services falls under what category?

investment 

1100

Who calculates CPI?

US Bureau of Labor Statistics 

1100

Frictional unemployment 

What is the type of unemployment that refers to natural matching of employees and employers?

1100

Why should investment only be done up to a point?

investment means you're not spending now so you can't invest everything 

1100

What 2 reasons do people invest in mutual funds?

They can diversify and let a professional do all the work

1100

What is foreign direct investment?

a company gets assets in a foreign country that it will manage directly

1100

A government tax credit for savings will __ the supply of savings

increase 

1200

The real output per person in the US has increased by a factor of __ since 1900

8

1200

Who sets fiscal policy in the US?

The Treasury Department 

1200

What was the max unemployment rate in US history?

23%

1200

In the US, which is greater: imports or exports?

imports 
1200

Excluding intermediate goods from GDP ensures that it is not affected by what?

the level of vertical integration 

1200

What award did Kuznets win?

Nobel Prize in Econ

1200

What are the 3 categories of investment?

business fixed investment

residential fixed investment

inventories 

1200

What survey makes the CPI?

Consumer Expenditure Survey 

1200

Structural unemployment 

What is the type of unemployment that results as a mismatch between skills?

1200

Knowledge is what kind of good?

public good 

1200

Banks serve society by being financial intermediaries and __

providing checking accounts to facilitate purchases

1200

What is portfolio investment?

a company buys stocks/bonds issued by a foreign company

1200

An increase in supply of savings would cause interest rate to increase/decrease.

decrease 

1300

What is total output divided by number of workers?

average labor productivity 

1300

What is US GDP per capita approximately?

$65,000 

1300

What is the natural rate of unemployment in the US?

4-5%

1300

What is the average inflation rate in US history?

2-3%

1300

Sylvia produces $200 of tomatoes, sells $100 at a farmers market, then uses the other half to make tomato sauce that she sells for $200. What is her total contribution to GDP?

$300

1300

What are the 3 limits of GDP?

– what counts as final goods?

– it doesn't include non-market goods

– ignores depreciation 

1300

What is business fixed investment?

business purchases of factories, offices, equipment, etc. 

1300

CPI equation?

100 * cost in year t / cost in base year 

1300

Cyclical unemployment 

What is the type of unemployment that occurs as a result of recessions and business cycle?

1300

Why is Saudi Arabia so rich?

naturel resources 

1300

Financially shaky companies sell bonds with a higher/lower interest rate.

higher 

1300

In an open economy how are NCO and NX related?

NCO = NX

1300

Supply and demand of savings depends on real/nominal interest rate?

real 

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