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MACRO > Chapter 6 > Flashcards

Chapter 6 Flashcards

1
Q

nominal GDP

A
  • money value at CURRENT PRICES of all final products and services produced annually in a country (aggregate output)
  • HOW TO CALCULATE: current year quantity of output multiplied by the current market price
  • is measured as a FLOW: an amount per unit of time
  • differences in nominal GDP between years are due to either price or quantity changes
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2
Q

real GDP

A
  • money value at CONSTANT PRICES of all final products and services produced annually in a country (aggregate output)
  • HOW TO CALCULATE: constant price of previous year multiplied by quantity output of current year
  • is measured as a STOCK: an amount at a moment of time
  • differences in real GDP between years show only changes in quantities
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3
Q

REAL GDP per person

A
  • the best measure of material standard of living
  • formula: real GDP/ Population
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4
Q

Value Added

A
  • value of output MINUS value of intermediate products and services bought form other businesses
  • also means the value of outputs MINUS the value of inputs
  • it solves the problem of double counting and of distinguishing between final and intermediate products and services
  • value added = aggregate income (or inputs income)
  • value added = aggregate spending (or value of final products and services)
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5
Q

enlarged circular glow spending formula

A

C+I+G+X-IM= Y
-C: consumer consumption
- I: investments for businesses
- G: government spending
- X: exports
- IM: imports

Y: income

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6
Q

potential GDP

A
  • real GDP when all inputs (labour, capital, land/ resources, and entrepreneurship) are FULLY EMPLOYED.
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7
Q

potential GDP per person

A

formula: potential GDP/ population

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8
Q

economic growth

A
  • expansion of economy’s capacity to produce products and services, increase in potential GDP (per person), caused by increases in quantity or quality of a country’s inputs
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9
Q

Points inside the PPF show

A

unemployed inputs

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10
Q

points on the PPF show

A

fully employed inputs

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11
Q

economic growth rate

A

annual % change in real GDP per person

formula: real GDP per person this year - real GDP per person last year / real GDP per person last year x100

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12
Q

rule of 70

A

number of years it takes for initial amount to double is around 70 years divided by the annual % growth rate

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13
Q

business cycles

A

up and down fluctuations of real and potential GDP

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14
Q

expansion

A

where real GDP increases (BOOM)

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15
Q

peak

A

highest point of an expansion… the turning point and beginning of contraction

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16
Q

contraction

A

period during which real GDP decreases (BUST)

17
Q

trough

A

lowest point of a contraction; the turning point beginning an expansion

18
Q

recession

A

two or more successive quarters of contraction of real GDP

19
Q

output gap

A

real GDP- potential GDP

20
Q

recessionary gap

A

real GDP below potential GDP
- gap is a negative number

21
Q

inflationary gap

A

real GDP above potential GDP
- gap is a positive number

22
Q

real GDP per person is a limited measure of well being and DOES NOT INCLUDE…

A
  1. non market production
  2. underground economy
  3. environmental damage
  4. leisure
  5. policial freedoms and social justice
23
Q

UN human development index (HDI)

A

measures the quality of life by combining life expectancy, educational achievement and income

24
Q

Final product or service

A

consumed directly by consumers

25
Q

intermediate product or service

A

input bought from other businesses

26
Q

increases in the quantity of capital means?

A

more factories and equipment

27
Q

increases in the quality of capital means?

A

technological change: improvements in quality of capital through innovation, research and development

28
Q

increases in the quantity of land and resources means?

A

bringing land and resources not connected to markets into the circular flow

29
Q

increases in quality of land and resources means?

A

due to increases in capital used with land

30
Q

increases in entrepreneurship mean

A

that quantity and quality are interrelated. there is better management techniques

MACRO (9 decks)

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