Chapter 13-16

Question 1

Macroeconomics

Answer 1

the branch of economics concerned with large-scale or general economic factors, such as interest rates and national productivity

Question 2

Property Income From Abroad

Answer 2

income earned by assets held in foreign countries

Question 3

Net Property Income From Abroad

Answer 3

the difference between income earned from assets abroad minus income paid to foreign assets

Question 4

GDP

Answer 4

the total value of all the goods and services produced and sold in a single year within a country

Question 5

GNI

Answer 5

the value of all goods and services produced by a country in a single year (including foreign assets and excluding assets from foreign countries)

Question 6

Real GDP / GNI

Answer 6

nominal GDP / GNI adjusted for inflation

Question 7

Boom

Answer 7

a period of increased commercial activity within an economy or industry (crest)

Question 8

Trough

Answer 8

a point that marks the end of a recession

Question 9

Recession

Answer 9

two consecutive quarters of falling GDP

Question 10

Recovery

Answer 10

the business cycle stage following a recession - GDP is gaining stability again

Question 11

Aggregate Demand

Answer 11

the total spending on goods and services in a period of time at a given price level

Question 12

Durable Good

Answer 12

a good that can be used over a long period of time (usually more than a year) (car, appliances)

Question 13

Non-Durable Good

Answer 13

goods that get immediately used up over used in a very short period of time (toilet paper, rice, newspaper)

Question 14

Replacement Investment

Answer 14

when firms spend on capital in order to maintain the productivity of their existing capital

Question 15

Induced Investment

Answer 15

when firms spend on capital to increase tier output to respond to higher demand in the economy

Question 16

Capital Stock

Answer 16

includes all goods that are made by people and used to produce other goods and services (factories, machines, offices, computers)

Question 17

Disposable Income

Answer 17

the income that people have remaining for spending and saving after incomes taxes have been paid

Question 18

Exports

Answer 18

goods and services that are bought by foreigners

Question 19

Imports

Answer 19

goods and services that are brought into the country

Question 20

Aggregate Supply

Answer 20

the total amount of goods and services that all industries in the economy will produce at every given price level

Question 21

Commodities

Answer 21

a good sold for production or consumption just as it was found in nature (primary product)

Question 22

Stagflation

Answer 22

high inflation combined with high unemployment and stagnant demand in a country’s economy

Question 23

Output Method

Answer 23

a method to calculate GDP by finding the actual value of all the goods and services produced in a nation

Question 24

Income Method

Answer 24

a method to calculate GDP by finding the amount of all incomes combined in an economy

Question 25

Expenditure Method

Answer 25

a method to calculate GDP by finding the amount of spending on all goods and services in the economy [C+I+G+(X-M)]

Question 26

GDP per Capita

Answer 26

GDP / population

Question 27

Consumption (C)

Answer 27

the total spending by consumers on domestic goods and services

Question 28

Investment (I)

Answer 28

the addition of capital stock to the economy, carried out by firms

Question 29

Government Spending (G)

Answer 29

money spent by the government on goods and services (health, education, law and order, social security, housing, defense)

Question 30

Net Exports (X-M)

Answer 30

export revenues minus import expenditures

Question 31

Short Term (macro def)

Answer 31

the period of time when the prices of the factors of production do not change (most importantly: the price of labor stays fixed)

Question 32

Supply Side shocks

Answer 32

shift in the SRAS curve

Question 33

New Classical LRAS

Answer 33

- belief of no government intervention - perfectly inelastic supply curve, as economy is running at full capacity

Question 34

Keynesian AS

Answer 34

Phase 1 : perfectly elastic - as quantity increase price does not because of spare capacity - high levels of unused factors such as unemployment labor and underutilized capital Phase 2 : when the economy is nearing potential output and the spare capacity becomes used up, with scarce factors of production Phase 3 : when the economy reaches its full capacity and it becomes impossible to increase output because all FOP are fully employed - perfectly inelastic curve

Question 35

D E D U

Answer 35

D = Define key terms E = Explain economic theory D = Diagrams explained U = Understanding of content

Question 36

Spare Capacity

Answer 36

when there are spare factors of production including land, labour and capital - an economy with a lot of spare capacity has an elastic supply curve

Question 37

Hidden Economy

Answer 37

the illegal market in a nation - working without a permit / under the table - drug trade - trafficking

Question 38

Leakages

Answer 38

- saving - imports - taxation

Question 39

Injection

Answer 39

- government spending - exports - investment