Chapter 15 Flashcards
(43 cards)
Define Economic growth
Increases in either real GDP or GDP per capital
How to calculate real GDP economic growth and real GDP per capita growth
- Real: (new-old)/old * 100
- per capita: (new - old) / old * 100
In short, why is economic growth a widely held goal.
Growth lessesns the burden of scarcity.
* A growing economy results in higher wages, and therefore increased or better standards of living
* A growing economy can consume more today while increasing its capacity to produce more in the future
* A growing economy provides policy space for new programmes to be implemented
What is the rule of 70 and how does it work?
A method for determining the number of years it will take for some measure to double, given its annual percentage increase. Example: to determine the number of years it will take for the price level to double, divide 70 by the annual rate of inflation.
Formula for to determine approximate number of years required to double real GDP
Appr number of years required to double real GDP = 70 / annual percentage rate of growth
What are some institutional structures that promote economic growth?
- strong property rights
- patents and copyrights
- efficient financial institutions
- free trade
- a competitive market system
- literacy and widespread education
Mention and briefly describe the main sources of economic growth:
Supply factor
* Increases in quantity and quality of natural recources
* increases in quantity and quality of human resources
* increases in the supply of capital goods
* improvements in technology
* any increases in the abobe willi ncreases the potential size of an economy’s GDP
Demand factor
* When supply increases, households, gov and businesses must purchases more g and s
* economic growth requires increases in total spending to realize the output gains made by increases production capacity
Efficiency factor
* Must use resources in least costly way (productive efficiency )
* to produce g and se that max utility (allocative efficiency)
Labour and productivity
Real GDP= Hours of work * labour productivity
Still need to make all slides for modern economic growth
According to growth critics, what are some criticisms of economic growth?
- Economic growth does not always solve or address social problems such as poverty
- Economic growth is detrimental to the environment
- Economic growth is not sustainable
- Economic growth may bring higher standards of living, but not necessarily good lives
Draw the business cycle with lables starting at peak
see 15. 2
Mention the 4 phases of the business cycle in order and briefly mention what each means
- peak : a temporary maximum in a business cycle
- recession: a period of decline in total output
- trough: a point at which output and employment are at their lowest levels
- expansion: a period in which real gross domestic product, income and employment rise
Make flashcards for causation a first glance and cyclical impact durables and non durables
What are some possible causes for a business cycle
- A momentous innovation
- An increase in government expenditure
- An increase in bond prices
How does a recession affect capital goods and consumer durables?
The demand for both capital goods and consumer durables declines
Define labour force
Persons 16 years of age and older who are not in institutions and who are employed or are unemployed and seeking work.
Define unemployment
THe failure of the economy to fully employ its labour force
Formula to calculate the unemployment rate
Unemployed / labour force * 100
Define discouraged workers
Employees who have left the labour force because they have not been able to find employment.
What are the 3 types of unemployment and define each
- frictional unemployment: A type of unemployment caused by workers voluntarily changing jobs and by temporary lay-offs; unemployed workers between jobs.
- structural unemployment : Unemployment of workers whose skills are not demanded by employers, who lack sufficient skill to obtain employment, or who cannot easily move to locations where jobs are available.
- cyclical unemployment A type of unemployment caused by insufficient total spending (or by insufficient aggregate demand).
Define the NRU
Natural rate of unemployment: ; the unemployment rate occurring when there is no cyclical unemployment and the economy is achieving its potential output; the unemployment rate at which actual inflation equals expected inflation, an economy produces its potential output.
What are the unequal burdens influencing unemployment
- Occupations
- age
- race and ethnicity
- province
- gender
Define inflation
A rise in the general level of prices in an economy.
Define the CPI
Consumer Price Index
An index that measures the prices of a fixed ‘market basket’ of some 300 goods and services bought by a ‘typical’ consumer.
Formula for measurement of inflation
inflation rate= (new CPI - old CPI )/ old CPI * 100
