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Flashcards in Chapter 19 Deck (40)
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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
Q

inflation

A
  • 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
Q

how CPI is calculated

A
  • 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
Q

calculate inflation rate

A
  • % change in CPI

- inflation rate = CPI this year - CPI last year/CPI last year x 100

28
Q

why does inflation matter

A
  • 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
Q

consequences of inflation

A
  • 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
Q

interest rates

A
  • 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
Q

nominal interest rate

A

price paid per dollar borrowed per period of time

32
Q

real interst rate

A
  • nominal rate of interest adjusted for the change in purchasing power
  • nominal i - inflation
33
Q

exchange rate

A

the number of units of domestic currency required to purchase one unit of foreign currency

34
Q

rise in exchange rate

A

takes more canadain dollars to purchase one unit of foreign currency - depreciation of canadian dollar

35
Q

fall in exchange rate

A

takes fewer canadian dollars to purcahse one unit of foreign currency - appreciation of canadian dollar

36
Q

foreign currency

A

foreign currencies or claims on foreign currencies like bank deposit, cheques, promissory notes, that are payable in foreign money

37
Q

trade balance

A
  • difference between exports and imports (net exports)

- trade surplus and deficit

38
Q

trade surplis

A
  • exports exceed imports
39
Q

trade deficit

A

imports exceed exports

40
Q

role of government policy

A
  • should something be done to minimize impact of fluctuations (short term)
  • some argue no