Chapter 19 Flashcards
(40 cards)
1
Q
macroeconomics
A
- focus on the performance of the economy as a whole
- short and long run fluctuations - business cycles
2
Q
standard of living
A
- access to goods and services that make life easier, safer, healthier, more enjoyable
3
Q
national product
A
- most comprehensive measure of a nation’s overall level of economic output
- sometimes called national output
4
Q
nominal GDP
A
- measure of the value of final goods and services produced in a country in a year using current prices
5
Q
real GDP
A
- measure of the final value of goods and services produced in a country in a year during specific time periods (usually a year) using constant prices
6
Q
average living standards over time
A
- output per person better indicator
- GDP/capita
7
Q
recession
A
- period where economy is growing at a rate significantly below normal
- 2 consecutive quarter rule
- particularly severe: depression
8
Q
expansion
A
- period where the economy is growing at a rate significantly above normal
- normally lasts longer than a recession
- particularly strong: boom
9
Q
peak
A
- high point of economic activity (GDP) prior to downturn
10
Q
trough
A
- low level of economic activity (GDP) prior to recovery
11
Q
why do we have fluctuations
A
- driven by unexpected events that people struggle to adjust to
12
Q
causes of shocks
A
- irregular innovation
- productivity changes
- monetary factors
- political events
- financial instability
13
Q
characteristics of short run fluctuations
A
- irregular length and severity
- felt through the economy, uneven industrial impact
- durable goods more sensitive to impact and interest rate fluctuations
- services and non durables less sensitive to fluctuations - cant not consume
- unemployment and inflation affected
14
Q
key macroeconomic variables
A
- national product and national income
- employment, unemployment, labour force
- productivity
- inflation and price level
- interest rates
- exchange rates and trade flows
15
Q
national output (Y) (income GDP)
A
- level of actual production of the economy
- total production of goods and services = total income
16
Q
potential output (Y*)
A
- level of production produced when factors of production are fully employed
17
Q
output gap
A
- actual output (Y) - potential output (Y*)
- if YY*, inflationary gap
18
Q
potential output employment
A
- when the economy is at potential output there is full employment
- frictional rate of unemployment
- natural rate of unemployment
19
Q
frictional unemployment
A
- due to natural turnover
- takes time to find job/employees
20
Q
structural unemployment
A
mismatch btwn jobs and workers
21
Q
cyclical unemployment
A
- caused by decline in total spending
- when real GDP is less than potential GDP
22
Q
true unemployment rate may be different than figures because
A
- rate excludes 3 groups of workers
- discouraged workers: people who want a job but havent made an effort to find one in the past 4 weeks bc they believe there are no jobs
- involuntary part time workers: people who want to work full time but can only find part time work
23
Q
productivity
A
- measure of the amount of output the economy produces per unit of input
- has been significant increase over the past 4 decades
- single largest cause of rising material living standards
24
Q
labour productivity
A
real GDP/level of unemployment
25
inflation
- unemployment can be reduced only at the cost of higher inflation and vice versa
- rise in the general level of prices and is measured as the % change in a price index (sich as CPI)
26
how CPI is calculated
- index that measures the price of a fixed market basket of goods ans services typically bought by a consumer
- CPI = 100 x cost of basket in current year / cost of basket in base year
27
calculate inflation rate
- % change in CPI
| - inflation rate = CPI this year - CPI last year/CPI last year x 100
28
why does inflation matter
- value money for what we can purchase with it
- purchasing power: amount of goods and services that can be bought with a unit of money
- inflation rate reduces purchasing power
- reduces real value of any sum fixed in nominal dollar terms
29
consequences of inflation
- people usually think its bad
- affects ppl differently
- depends on intensity and if anticipated
- if not inticpiaed, those with fixed incomes, savers and creditors are hurt
30
interest rates
- the price paid per dollar borrowed per period of time
- expressed as a proportion or percentage
- burden of borrowing depends on real interest rate
31
nominal interest rate
price paid per dollar borrowed per period of time
32
real interst rate
- nominal rate of interest adjusted for the change in purchasing power
- nominal i - inflation
33
exchange rate
the number of units of domestic currency required to purchase one unit of foreign currency
34
rise in exchange rate
takes more canadain dollars to purchase one unit of foreign currency - depreciation of canadian dollar
35
fall in exchange rate
takes fewer canadian dollars to purcahse one unit of foreign currency - appreciation of canadian dollar
36
foreign currency
foreign currencies or claims on foreign currencies like bank deposit, cheques, promissory notes, that are payable in foreign money
37
trade balance
- difference between exports and imports (net exports)
| - trade surplus and deficit
38
trade surplis
- exports exceed imports
39
trade deficit
imports exceed exports
40
role of government policy
- should something be done to minimize impact of fluctuations (short term)
- some argue no
