Go with the Flow
These are the 2 players in the simplified circular flow model
Households and Firms
Someone who does not have a job, and is not looking for one may cause us to understate this
Unemployment Rate
This is the vocab word for prices going down over time
Deflation
A value is called "real" because it does this.
Adjusts for inflation
This is what GDP stands for
Gross Domestic Product
This transfer of money is the incentive for labor
Wages
This is the formula for labor force
employed + unemployed
The ratio between the market basket in the current year divided by the market basket in the base year, times 100.
CPI (Consumer Price Index)
Real income is commonly used to give us a better idea of this concept relating to the amount of goods and services that can be bought
Purchasing Power
This is the formula used for calculating GDP
C + I + G + (X-M)
Give an example of a leakage from the circular flow model. This is something that makes money "leak" or leave the circular flow money flow.
Savings, imports, and destruction of money
These are the three types of unemployment
Structional, Frictional, and Cyclical
In this year, the nominal value = real value
base year
This will happen if nominal income increases by a lower rate than prices
Real income will decrease
Name one thing that is not included in the calculation of GDP that causes it to understate the welfare of a counties economy
Housework, Volunteering, Leisure Time, or Natural Beauty
Households put their private savings into this market, which is then transferred to the firms in exchange they hope to earn more money later.
Financial Market
employed divided by the labor force
labor force participation rate
A CPI of 120 indicates that the economy has experienced this rate of inflation since the base year
20%
This formula applies A = P(1+r) in terms of real gdp, nominal gdp and the gdp deflator
Nominal GDP = Real GDP * GDP Deflator/100
This value is similar to the CPI in concept, but different in calculation... calculated as nominal GDP divided by real GDP multiplied by 100.
GDP Deflator
The rest of the world interacts with these two markets
The goods and services market, and the financial market.
During this stage of the business cycle, unemployment will fall
Expansion
Who counts as being part of the labor force?
those in the civilian non-institutional population, age sixteen years or older, who are employed or who are unemployed and seeking employment.
Multiply these two values when trying to calculate the real GDP of a simple economy by hand.
Price in the base year times quantity in the current year
James was born in England, grew up in the united states, lives in Mexico and ordered a new bike. The bike was built in China, shipped first to a shipping center in Canada, before ultimately being delivered to James' doorstep. This transaction will count in which countries GDP?
China