B5: Economic Concepts Flashcards Preview

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Flashcards in B5: Economic Concepts Deck (16):
1

Method of Measuring GDP (Expenditure Approach)

GOVERNMENT purchases
Gross private domestic INVESTMENT
Personal CONSUMPTION expenditures
Net EXPORTS

2

Method of Measuring GDP (Income Approach)

INCOME of proprietors
PROFITS of corporations
Net INTEREST income
RENTAL income
ADJUSTMENTS for net foreign income
TAXES
EMPLOYEE wages
DEPRECIATION (capital consumption allowance

3

Frictional Unemployment

Normal unemployment resulting from workers routinely changing jobs or from workers being temporarily laid off

4

Structural Unemployment

Jobs available in the market do not correspond to the skills of the workforce

5

Seasonal Unemployment

Seasonal changes in the demand and supply of labor

6

Cyclical Unemployment

Caused by declines in real GDP or recession or in any period when the economy fails to operate at its potential

7

Natural Rate of Unemployment

the sum of frictional, structural, and seasonal unemployment

8

Full Employment

NO cyclical unemployment. There is still frictional, structural and seasonal unemployment

9

Inflation and the value of money

Inverse relationship

Holding monetary assets = bad because of fixed amount of money

Holding monetary liabilities = good because fixed amount of debt

10

M1 money supply

coins, currency, checkable deposits, and traveler's checks

11

M2 money supply

M1 + CD's less than $100,000, money market deposit accounts, mutual funds, and savings accounts

12

M3 money supply

M1 + M2 + CD's greater than $100,000

13

Expansionary Monetary Policy

Money Supply, Aggregate Demand, GDP, and Prices are all UP

Interest Rates, Unemployment are DOWN

14

Contractionary Monetary Policy

Money Supply, Aggregate Demand, GDP, and Prices are all DOWN

Interest Rates and Unemployment are UP

15

Increasing Money Supply

LOWER Interest Rates, Increase AD, and PURCHASE securities

16

Decreasing Money Supply

INCREASE Interest Rates, Lower AD, and SELL securities