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MacroEconomics > 6-10 > Flashcards

6-10 Flashcards

1
Q

Labor Force

A

age 16 and over who are either employed or actively seeking work.

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2
Q

Production Possibility

A

If we end up inside the production possibilities curve, we are not producing at capacity.

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3
Q

Unemployment

A

the inability of labor force participants to find jobs.

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4
Q

Okun’s Law

A

a 1% increase in unemployment results in a 3% decrease in GDP

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5
Q

Unemployment rate

A

the proportion of the labor force that is unemployed.

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6
Q

Unemployment rate formula

A

of unemployed people/ labor force

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7
Q

Discouraged Workers

A

Former job seekers who have given up and no longer actively seek employment.

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8
Q

Underemployed

A

People who want full-time work in their field but can find only part-time work or work at jobs below their capability

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9
Q

Seasonal Unemployment

A

occurs due to seasonal changes.

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10
Q

Frictional Unemployment

A

the period of unemployment experienced by people moving between jobs or into the labor market.

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11
Q

Structural Unemployment

A

caused by a mismatch between the skills (or location) of job seekers and the requirements (or location) of available jobs.

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12
Q

Cyclical Unemployment

A

caused by a decline in economic activity.

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13
Q

Inflationary Flashpoint

A

The rate of output at which inflationary pressures intensify. At or below 4%

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14
Q

Full employment

A

the lowest unemployment rate possible

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15
Q

The natural rate of unemployment

A

Long-term rate of unemployment determined by structural forces in labor and product markets.

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16
Q

Outsourcing

A

occurs when production is relocated (and jobs) to other countries to take advantage of lower production costs.

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17
Q

Inflation

A

an increase in the average level of prices, not a change in any specific price of a good.

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18
Q

Deflation

A

reduction of the general level of prices

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19
Q

Relative Price

A

the price of one good compared to the price of other goods.

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20
Q

Nominal Income

A

the amount of income received in a given time period, measured in current dollars.

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21
Q

Real Income

A

the income in constant dollars

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22
Q

Money Illusion

A

using nominal dollars rather than real dollars to gauge changes in one’s income or wealth

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23
Q

hyperinflation

A

inflation rates in excess of 200% lasting at least one year

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24
Q

Bracket creep

A

in a progressive tax system, when nominal incomes rise, the taxpayer gets pushed into a higher tax bracket.

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25
Q

Consumer Price Index (CPI)

A

A measure of the average price of consumer goods and services

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26
Q

CPI Formula

A

price in base year/ price in current year

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27
Q

Base Year

A

the reference year whose dollar value will be used. Automatically set to 100

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28
Q

Core Inflation Rate

A

changes in CPI, excluding food and energy prices

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29
Q

GDP Deflator

A

changes in prices of all goods and services included in GDP

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30
Q

Nominal GDP

A

GDP given in current prices, without adjustment for inflation

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31
Q

Cost of Living Adjustments (COLA)

A

automatic adjustments of nominal income to the rate of inflation.

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32
Q

Real Interest Rate

A

Nominal Interest rate- Anticipated rate of inflation

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33
Q

Adjustable-rate mortgage (ARM)

A

a mortgage (home loan) that adjusts the nominal interest rate to changing rates of inflation.

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34
Q

Business Cycle

A

alternating periods of economic growth and contraction.

35
Q

Laissez Faire

A

the doctrine of “leave it alone,” of nonintervention by government in the market mechanism.

36
Q

Law of Demand

A

at a higher price, consumers will demand a lower quantity of a good

37
Q

Say’s Law

A

Supply creates its own demand

38
Q

Recession

A

real GDP contracts (for two or more consecutive quarters).

39
Q

Growth Recession

A

real GDP grows, but slower than 3%

40
Q

Aggregate Demand

A

the total quantity of output (real GDP) demanded at alternative price levels in a given time period

41
Q

Aggregate Supply

A

the total quantity of output (real GDP) producers are willing and able to supply at alternative price levels in a given time period

42
Q

Macro Equilibrium

A

the combination of price level and real output that is compatible with both AD and AS

43
Q

Market Failure

A

inefficient distribution of resources

44
Q

Fiscal Policy

A

the use of government spending and taxation to influence the economy

45
Q

monetary policy

A

the use of money and credit controls to influence macroeconomic outcomes.

46
Q

Supply-side Policy

A

the use of tax incentives, deregulation, and other mechanisms to increase the ability and willingness to produce.

47
Q

Trade Policy

A

reduce trade barriers and lower the value of the dollar to lower input costs.

48
Q

Peak

A

GDP maximizes

49
Q

Recovery

A

GDP increases

50
Q

Trough

A

GDP minimizes

51
Q

Contraction

A

GDP declines

52
Q

Real Balances Effect

A

the cash you hold is worth more when the price level falls, so you can buy more.

53
Q

Foreign Trade Effect

A

lower price levels in the United States convince customers to buy more American goods and fewer foreign goods.

54
Q

Interest Rate Effect

A

lower interest rates promote more borrowing and more spending.

55
Q

Profit Effect

A

if there is no change in the cost of operating a business, rising prices will improve profits and suppliers will bring more products to the market.

56
Q

Consumption (C)

A

spending by consumers on final goods and services.

57
Q

Disposable Income (Yd)

A

income remaining after paying taxes.

58
Q

Saving (S)

A

disposable income not spent.

59
Q

Disposable Income Formula

A

Yd= C+S

60
Q

Average Propensity to Consume (APC)

A

the total consumption in a given time period divided by total disposable income.

61
Q

APC Formula

A

APC= C/Yd

62
Q

Marginal Propensity to Consume (MPC)

A

the fraction of each additional (marginal) dollar of disposable income spent on consumption.

63
Q

MPC Formula

A

Change in C/ Change in Yd

64
Q

Marginal Propensity to Save (MPS)

A

the fraction of each additional (marginal) dollar of disposable income not spent on consumption – that is, saved.

65
Q

MPS Formula

A

1-MPC

66
Q

Autonomous Consumption

A

consumer spending not dependent on current income.

67
Q

Consumption Function

A

C= a+bYd, where C= Current Consumption, a= Autonomous Consumption, b= MPC, Yd= Disposable Income

68
Q

Dissaving

A

consumers use savings to buy things.

69
Q

Investment Determinants

A

Expectations, Interest Rates, Technology and Innovation

70
Q

(X-M) decreases

A

AD shifts Left

71
Q

(X-M) increases

A

AD shifts right

72
Q

Investment Declines

A

AD shifts left

73
Q

Investment Increases

A

AD shifts right

74
Q

Recessionary GDP gap

A

the amount by which equilibrium GDP falls short of full-employment GDP.

75
Q

Inflationary GDP gap

A

the amount by which equilibrium GDP exceeds full-employment GDP.

76
Q

Leakage

A

income that is generated in production but is diverted out of the circular flow.

77
Q

Components of Leakage

A

Saving, Imports, Taxes

78
Q

Injection

A

an addition of spending in the circular flow.

79
Q

Components of Injection

A

Investment, Government spending, Exports

80
Q

Steps in the multiplier process from a decline in investment

A

Unsold goods appear.

Production is cut back, reducing employment or wages.

Income decreases.

Consumer spending decreases.

Process repeats.

81
Q

Steps in the multiplier process from an increase in investment

A

Inventory depletes (a warning sign of inflation) and prices rise.

Production is increased.

Income increases.

Consumer spending increases.

Process repeats.

82
Q

Multiplier Formula

A

1/1-MPC

83
Q
A

MacroEconomics (3 decks)

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