GDP
What does GDP stand for?
What is Gross Domestic Product?
Whats the definition of Unemployment?
What does the simple circular-flow diagram represent?
The transactions that take place in the economy by two kinds of flows: physical things and raw materials
Name three types of unemployment
Frictional unemployment, structural and cyclical
Formula to calculate the labor participation rate
Labor force/ Population age 16 and older times 100
What measures the final output of an economy in a year?
True or false: The unemployment rate is an important measure of an economy
True
What are the types of Circular Flow?
Simple and Expanded
The deviation of the actual rate of unemployment from the natural rate.
price level in y 2-price level in y1/price level in y1 times 100
What is the value added approach?
The value of its sales minus the value of its purchase of inputs.
What is labor force?
Sum of the employed and the unemployed
What does the expanded circular-flow diagram show?
How the government is involved in flows between the households and firms in the economy.
What is structural unemployment?
Unemployment that results when workers lack the skills required for the available jobs.
Formula for the unemployment rate
# of unemployed workers/labor force times 100
What is the difference between the expenditure approach and the income approach when calculating the GDP?
Expenditure approach adds up all the spending and income approach adds up all the incomes. Both over a specific period of time
When does the unemployment rate always rise?
During Recession
What do financial markets do?
Channel private savings into government borrowing and investment spending.
What is frictional unemployment?
Formula of GDP
C+I+G+(X-M)
Give two examples of whats included in GDP and two examples of whats not included in GDP.
Included: Domestically produced final goods and services, new construction of structures and changes to inventories.
Not included: nonmarket transactions, intermediate goods and services, inputs, used goods, financial assets and foreign-produced goods and services
How are the GDP and unemployment related?
Move in opposite directions because more productions means more workers must be hired, and less production means fewer workers are hired.
What sectors of the economy does the circular flow of funds connect?
Households, firms and governments.
What is the natural rate of unemployment?
Rate that arises from the effects of frictional plus unemployment.
Frictional unemployment + Structural Unemployment