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MacroEconomics > 6-10 > Flashcards

6-10 Flashcards

(83 cards)

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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
Consumer Price Index (CPI)
A measure of the average price of consumer goods and services
26
CPI Formula
price in base year/ price in current year
27
Base Year
the reference year whose dollar value will be used. Automatically set to 100
28
Core Inflation Rate
changes in CPI, excluding food and energy prices
29
GDP Deflator
changes in prices of all goods and services included in GDP
30
Nominal GDP
GDP given in current prices, without adjustment for inflation
31
Cost of Living Adjustments (COLA)
automatic adjustments of nominal income to the rate of inflation.
32
Real Interest Rate
Nominal Interest rate- Anticipated rate of inflation
33
Adjustable-rate mortgage (ARM)
a mortgage (home loan) that adjusts the nominal interest rate to changing rates of inflation.
34
Business Cycle
alternating periods of economic growth and contraction.
35
Laissez Faire
the doctrine of “leave it alone,” of nonintervention by government in the market mechanism.
36
Law of Demand
at a higher price, consumers will demand a lower quantity of a good
37
Say's Law
Supply creates its own demand
38
Recession
real GDP contracts (for two or more consecutive quarters).
39
Growth Recession
real GDP grows, but slower than 3%
40
Aggregate Demand
the total quantity of output (real GDP) demanded at alternative price levels in a given time period
41
Aggregate Supply
the total quantity of output (real GDP) producers are willing and able to supply at alternative price levels in a given time period
42
Macro Equilibrium
the combination of price level and real output that is compatible with both AD and AS
43
Market Failure
inefficient distribution of resources
44
Fiscal Policy
the use of government spending and taxation to influence the economy
45
monetary policy
the use of money and credit controls to influence macroeconomic outcomes.
46
Supply-side Policy
the use of tax incentives, deregulation, and other mechanisms to increase the ability and willingness to produce.
47
Trade Policy
reduce trade barriers and lower the value of the dollar to lower input costs.
48
Peak
GDP maximizes
49
Recovery
GDP increases
50
Trough
GDP minimizes
51
Contraction
GDP declines
52
Real Balances Effect
the cash you hold is worth more when the price level falls, so you can buy more.
53
Foreign Trade Effect
lower price levels in the United States convince customers to buy more American goods and fewer foreign goods.
54
Interest Rate Effect
lower interest rates promote more borrowing and more spending.
55
Profit Effect
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
Consumption (C)
spending by consumers on final goods and services.
57
Disposable Income (Yd)
income remaining after paying taxes.
58
Saving (S)
disposable income not spent.
59
Disposable Income Formula
Yd= C+S
60
Average Propensity to Consume (APC)
the total consumption in a given time period divided by total disposable income.
61
APC Formula
APC= C/Yd
62
Marginal Propensity to Consume (MPC)
the fraction of each additional (marginal) dollar of disposable income spent on consumption.
63
MPC Formula
Change in C/ Change in Yd
64
Marginal Propensity to Save (MPS)
the fraction of each additional (marginal) dollar of disposable income not spent on consumption – that is, saved.
65
MPS Formula
1-MPC
66
Autonomous Consumption
consumer spending not dependent on current income.
67
Consumption Function
C= a+bYd, where C= Current Consumption, a= Autonomous Consumption, b= MPC, Yd= Disposable Income
68
Dissaving
consumers use savings to buy things.
69
Investment Determinants
Expectations, Interest Rates, Technology and Innovation
70
(X-M) decreases
AD shifts Left
71
(X-M) increases
AD shifts right
72
Investment Declines
AD shifts left
73
Investment Increases
AD shifts right
74
Recessionary GDP gap
the amount by which equilibrium GDP falls short of full-employment GDP.
75
Inflationary GDP gap
the amount by which equilibrium GDP exceeds full-employment GDP.
76
Leakage
income that is generated in production but is diverted out of the circular flow.
77
Components of Leakage
Saving, Imports, Taxes
78
Injection
an addition of spending in the circular flow.
79
Components of Injection
Investment, Government spending, Exports
80
Steps in the multiplier process from a decline in investment
Unsold goods appear. Production is cut back, reducing employment or wages. Income decreases. Consumer spending decreases. Process repeats.
81
Steps in the multiplier process from an increase in investment
Inventory depletes (a warning sign of inflation) and prices rise. Production is increased. Income increases. Consumer spending increases. Process repeats.
82
Multiplier Formula
1/1-MPC
83

MacroEconomics (3 decks)

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