Chapter 3 GDP Inflation Unemployment CPI

Question 0

Define macroeconomics

Answer 0

Collective actions of entire economy measures movements and output him prices for whole economy domestic and global

Question 1

What is microeconomics

Answer 1

Individual decision-making utility supply and demand

Question 2

What are the three goals of economic policy

Answer 2

Maximize economic output and promote production of goods
Minimize the number of people who cannot work
Maintain stable prices

Question 3

Who is responsible for meeting the three economic policy goals

Answer 3

The government from the government employment act of 1946

Question 4

How can we meet the three economic policy goals

Answer 4

By aggregation

Question 5

What is aggregation

Answer 5

The process of putting small numbers into larger statistical measure to track large-scale movements

Question 6

In the circular flow what does the money flows rely on

Answer 6

Wages rent interest profits

Question 7

What does the product flows rely on

Answer 7

Land labor capital entrepreneurship

Question 8

Briefly describe the circular flow

Answer 8

Your output is someone else’s income

Business owners are dependent on customers and vice versa

Question 9

What are the big three

Answer 9

Gross domestic product
Unemployment rate
Consumer price index

Question 10

Define gross domestic product

Answer 10

Measures overall output and the economy in dollars

tells us how much stuff we are making

Question 11

Define unemployment rate

Answer 11

Tells us how many people that want to work and can’t find jobs

Question 12

Define consumer price index

Answer 12

Tells how much overall prices are rising or falling in the economy

Question 13

What do the big three measure

Answer 13

Economic performance

Question 14

Went to the big three help us do

Answer 14

Understand problems that face modern economics
Understand how we measure performance
Gives us direction to what is happening

Question 15

What does the national income accounting GDP help us do

Answer 15

See the standard of living

Question 16

What is GDP

Answer 16

Total value of all final goods and services produced within our domestic border within a given year
Do not double count

Question 17

What counts in GDP

Answer 17

Final goods and services which are only the goods at retail locations
This make sure all value added is accounted for

Goods and services within our domestic borders

Question 18

What doesn’t count for GDP

Answer 18

Financial transactions

Used goods because they were already counted for in earlier years

Black markets because GDP only counts legitimate transactions

Question 19

What percent of the economy is black-market part

Answer 19

15% of the economy

Question 20

How do we measure GDP

Answer 20

The income method

The expenditures method

Question 21

What is the purpose of the expenditures method

Answer 21

Capture all spending done in the economy at retail

Question 22

What are the four categories of the expenditures method

Answer 22

Consumption
Investment
Government
Net exports

Question 23

Define consumption

Answer 23

Spending on stuff
Because category
70% of economic activity

Question 24

Define investment

Answer 24

Spending by business on capital goods | Most volatile changes most frequently

Question 25

What should you keep in mind for investment

Answer 25

People buying new houses counts as investment | Business building inventories Count as well

Question 26

Explain the government part of the expenditures method

Answer 26

Spending on final goods and services by the government Not welfare 20% of economy

Question 27

Expenditures method net exports

Answer 27

Exports added to GDP Imports subtracted from GDP -5% of economy We import more than we export

Question 28

What is the equation for the expenditures method to calculate GDP

Answer 28

C + I + G + ( X - M ) = GDP

Question 29

What is the income method to calculate GDP

Answer 29

Tracks the income generated

Question 30

Are the parts income

Answer 30

``` Wages and salaries Rent Interest Proprietor income Corporate profits ```

Question 31

What is the overall goal for GDP

Answer 31

Only Count economic activity once

Question 32

What are the problems of GDP measuring the social well-being

Answer 32

``` Industrial pollution Natural disasters and environmental cleanup Leisure time Black-market Household production and activity ```

Question 33

Explain industrial pollution GDP problem

Answer 33

Doesn't count degradation of environment Social well-being worse due to pollution Need green GDP which nets out pollution costs

Question 34

Explain the natural disasters and environmental cleanup GDP problem

Answer 34

Cost a lot to clean up GDP actually grows So GDP says we're better off but we are not

Question 35

Explain leisure time problem of GDP

Answer 35

Well-being is enhanced by leisure time GDP does not count this GDP wants us to work more

Question 36

Explain the black market GDP problem

Answer 36

GDP does not count the economic activity in black markets | Misses utility created by these activities

Question 37

Explain the household production and activity GDP problem

Answer 37

A lot of economic activity goes on in the household | GDP it does not take this into account

Question 38

Is there a perfect measure for our well-being

Answer 38

No

Question 39

Give an insight to unemployment

Answer 39

Unemployment workers means unemployed capital | This causes hardship for people who cannot find work

Question 40

People with jobs

Answer 40

Employed

Question 41

People without jobs looking for jobs and are available to work

Answer 41

Unemployed

Question 42

People not in the labor force you do not count towards unemployment statistics

Answer 42

People you neither employed nor unemployed

Question 43

What are the types of unemployment

Answer 43

Seasonal Frictional Structural Cyclical

Question 44

Seasonal unemployment

Answer 44

People not employed due to seasonal nature of work

Question 45

Frictional unemployment

Answer 45

People between jobs while looking for another | Shortest type

Question 46

Structural unemployment

Answer 46

People who lose work because their skills are not needed in current economy Longest type

Question 47

Cyclical unemployment

Answer 47

People lose jobs due to economic downturn such as a recession Totally out of the workers control

Question 48

What type of unemployment do we care about

Answer 48

Cyclical and structural

Question 49

What happens to unemployment as GDP decreases

Answer 49

Unemployment increases

Question 50

what are the problems with unemployment

Answer 50

Discouraged workers and underemployed

Question 51

Discouraged workers

Answer 51

People that have given up looking for work and are out of the labor force This makes unemployment rate seem lower than it actually is

Question 52

Under employed

Answer 52

Workers working fewer hours then they would like and would work more if they could Hey count as employed thus skewing unemployment rate

Question 53

How do we make unemployment more accurate

Answer 53

Factor in the discouraged workers and underemployed groups

Question 54

How do we solve unemployment

Answer 54

Increase economic activity in some way or fashion Provide people with temporary benefits Use job-training programs and unemployment agencies to retrain people for work or match them with jobs in the area

Question 55

Define inflation

Answer 55

A sustained increase in the price level overtime

Question 56

What is inflation and what does it create

Answer 56

Inflation is unexpected and creates arbitrary

Question 57

Who Sri the winners for inflation

Answer 57

The borrowers

Question 58

Who are the losers for inflation

Answer 58

Lenders Savers Fixed income folks

Question 59

Happens to purchasing power as inflation is increased

Answer 59

Purchasing power decreases

Question 60

What happens because most inflation is expected

Answer 60

People receive regular wage raises these offset the losses in purchasing power Thanks adjust interest rates to avoid inflationary losses

Question 61

What interest rate includes inflation

Answer 61

Nominal interest this always changes

Question 62

What rate stays the same and does not include inflation

Answer 62

Real interest rate

Question 63

What is the goal to measuring inflation

Answer 63

Accurately measure overall prices

Question 64

The CPI stand for

Answer 64

Consumer price index

Question 65

What are the two tips for measuring inflation

Answer 65

Use a diverse weighted market basket of goods and services | Use a base year of prices as a reference point of comparison

Question 66

What does it mean by diverse and weighted

Answer 66

Diverse means different good types | Weighted means match goods to proper proportions ex. Age groups

Question 67

What does the consumer price index do

Answer 67

Takes a set of complicated Numbers and turns them into a single understandable number

Question 68

What must nominal GDP always do for real GDP to grow

Answer 68

Nominal GDP must grow faster than inflation

Question 69

What should always be taken into account when analyzing the growth of the economy

Answer 69

Inflation

Question 70

What are the four parts of the business cycle

Answer 70

Trough Expansion Peak Recession

Question 71

Trough

Answer 71

Low point of economic activity in a cycle

Question 72

Expansion

Answer 72

GDP growing CPI rising Unemployment falling

Question 73

Peak

Answer 73

Height of economic activity just before a recession

Question 74

Recession

Answer 74

GDP shrinking CPI falling unemployment rising

Question 75

How long must GDP shrink for it to be considered a recession

Answer 75

Six months at least

Question 76

What are most recessions cost by

Answer 76

Falling investment

Question 77

What is the good number for GDP

Answer 77

3-5% growth

Question 78

What is the good numbers for unemployment

Answer 78

5 to 6%

Question 79

What is unemployment always

Answer 79

Sectional and structural unemployment

Question 80

What are the good numbers for CPI

Answer 80

2 to 3%

Question 81

What can excessive GDP growth tigger and why

Answer 81

Inflation and because scarcity is more acute