Column A
GDP that is adjusted for inflation
REAL GDP
Other than GDP, name the other 2 measures that we studied in that are economic indicators
Define Deflation
the decrease in the AVERAGE price of goods and services
Who struggles the most with inflation?
People on FIXED income, (retirees, minimum wage earners) They are no longer working and not getting raises to keep up with inflation.
Type of unemployment that arises from downsizing of companies (people laid off) or when the entire economy slows down.
Cyclical Unemployment
GDP that is adjusted for inflation
Real GDP
How many consecutive quarters of decline in GDP growth indicates that the country is entering into a recession?
2 CONSECUTIVE QUARTERS
unusually rapid inflation, more than 50% in a single month. Rare in the U.S.
HYPER-INFLATION
What is the reason for deflation? Why is it bad for an economy?
Occurs in times of economic distress (recession and depression). Price go down because unemployed rate is high and people are not spending money. They also hoard their money in anticipation of price dropping further. Supply & demand causes prices to drop. (no demand). Deflation is bad for the economy, it will cause higher unemployment and lower production in the long run.
Which is considered the worst type of unemployment?
Cyclical
Standard of Living
Also known as GDP per capita, gives a idea of how wealthy a country is. United states GDP per capita is approximately $80,000 per person, which is on the high side
What’s not included in the GDP Calculation (think of the definition of GDP)
Intermediary goods (not final goods) and production in other countries even if owned by a U.S. Firm
The decrease in the amount of goods and services a dollar can buy over time. A dollar today is worth more than a dollar tomorrow due to inflation.
The amount of people unemployed divided by the labor force.
UNEMPLOYMENT RATE
You must be actively looking for work to be considered unemployed. The labor force is comprised of both people who are working AND those who wish to be working (ie. unemployed)
Name the 4 phases of the business cycle
Depression (trough)
Recovery
Prosperity (peak)
Recession
Why is real GDP a better indicator of economic growth than Nominal GDP.
it takes out the effect of inflation
What is the United State’s GDP for 2023 (Nominal & Real)
27 Trillion and 22 Trillion
Over time inflation does what to the purchasing power of the dollar?
It decreases the value of the dollar
Type of unemployment that is unavoidable and will always be there...people between jobs, (just graduated college, switching jobs). Not worrisome to economists
Frictional Unemployment
Define Labor Force and who is NOT included in the labor force
Labor Force - all adult population currently working or looking for work
Who is not included in labor force - kids, stay at home moms/dads, older retired people, discouraged workers, disabled, incarcerated people
If a countries GDP is $1 billion dollars in 2022, how would we determine if that country’s economy is growing or contracting? What other information would we need?
compare it to prior year to determine growth rate.
(Current year (minus) Prior year) divided by Prior year is the formula to calculate % growth
Define Inflation,
the increase in the AVERAGE price of goods and services
How is inflation measured?
Consumer Price Index (CPI) Thousands of goods and services are priced (market basket) each quarter to determine upward or downward average prices.
Type of unemployment that arises from change in skills needed or seasonal employment.
Structural unemployment
How is the unemployment rate calculated?
# of unemployed people divided by (employed population and unemployed population)