Chapter 6 - Introduction to Macroeconomics and GDP Flashcards Preview

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Flashcards in Chapter 6 - Introduction to Macroeconomics and GDP Deck (68):
1

What is the study of the economy of an entire nation or society?

Macroeconomics

2

What is the study of individual people, firms, and industries?

Microeconomics

3

What do economists measure in order to figure out what the overall health of the economy is?

The total output of an economy

4

Why do we cover output and input together?

They are essentially the same thing

5

What is the market value of all final good and services produced within a nation during a specific time period?

Gross Domestic Product (GDP)

6

What is the typical time period of GDP?

A year

7

Why is GDP useful to examine?

1. It can estimate living standards across time and nations
2. It measures economic growth
3. It can determine whether an economy is experiencing a short-run expansion or recession

8

What is the per capita GDP?

The GDP per person

9

How do you find the per capita GDP?

Divide the GDP by the population

10

Why do prices of goods and services almost always rise over time?

Inflation

11

What is the growth of the overall level of prices in the economy?

Inflation

12

What is GDP adjusted for changes in prices over time called?

Real GDP

13

What is Economic growth measured as?

The percentage change in real per capita GDP

14

What are short-term economic downturns?

Recessions

15

What are short-run fluctuations in economic activity?

Business cycles

16

What two phases do the peaks and troughs divide the business cycle into?

1. Expansion
2. Contraction

17

When does an economic expansion occur?

From the bottom of the trough to the next peak

18

When does n economic contraction occur?

From the peak downward to the trough

19

What is used to determine whether an economy is expanding or contracting in the short run?

GDP

20

Economists use what to add corn and cars and the other goods and services in GDP?

Market values

21

How do you find the market value of one good, what about multiple goods?

1. You take the quantity and times it by the price
2. You add the market values of everything together

22

Does the majority of the U.S GDP come from goods or services?

Services

23

What are outputs that provide benefits without the production of tangible products?

Services

24

Does all the spending involved in building a single good count towards GDP?

No

25

What are goods that are repackaged or bundled with other good for a later sale?

Intermediate goods

26

What are goods that are sold to final users?

Final goods

27

Does GDP only include goods and services that are produced domestically?

Yes

28

What is the output produced by workers and resources owned by residents of the nation?

Gross national product (GNP)

29

Do sales of financial assets such as stocks and bonds count toward GDP?

No

30

What process does the BEA use to tally GDP data?

The national income accounting

31

What are the four major categories that GDP is broken up into?

1. Consumption
2. Investment
3. Government purchases
4. Net exports

32

Which government agency is in charge of tallying GDP data?

The Bureau of Economic Analysis (BEA)

33

What is the largest component in GDP?

Consumption

34

What is the purchase of final goods and services by households?

Consumption

35

Does consumption include of buying new houses?

No

36

What are the two categories that consumption is divided into?

1. Durable goods
2. Non-durable goods

37

Which consumption goods are consumed over a short period?

Non-durable goods

38

Which consumption goods are consumed over a long period?

Durable goods

39

What refers to private spending on tools, plant, and equipment used to produce future output?

Investment

40

What includes spending by all levels of government on final goods and services?

Government purchases

41

Are transfer payments (welfare payments or unemployment insurance) included in government purchases?

No

42

What's the equation to find net exports?

Exports - imports

43

Do we count imports in our GDP?

No

44

What is the GDP calculated from current prices called?

Nominal GDP

45

What is an index of the average prices of goods and services throughout the economy?

Price level

46

What is the price level index that includes prices of final goods and services in GDP?

GDP deflator

47

Is real GDP adjusted for inflation?

Yes

48

What is it when our nominal GDP is equal to our real GDP?

Base year

49

What number should the price level be in a base year?

100

50

How do you convert nominal GDP into real GDP?

(Nominal GDP / Price level) x 100

51

What are calculated as percentage changes in a variable?

Growth rates

52

What are the steps to finding the growth rate?

1. value - (value -1)
2. / by value - 1
3. x 100

53

What is nominal GDP equal to?

Real GDP + price level

54

What was the rate of growth of real GDP in Mexico in 2010?
Nominal GDP = 18
Price level growth rate = 4.4

13.6

55

What is the single most important indicator of macroeconomic performance?

GDP

56

Why do economists stress real GDP rather than nominal GDP when looking at GDP changes over time?

Real GDP takes inflation into consideration

57

What are the four shortcomings of GDP?

1. Non-market goods
2. Underground Economy
3. Quality of the Environment
4. Leisure time

58

What are goods and services produced, but not sold?

Nonmarket goods

59

Which shortcomings of GDP include uncompensated household activities?

Nonmarket goods

60

Which shortcoming of GDP is washing the dishes an example of?

Nonmarket goods

61

Which shortcoming of GDP is babysitting an example of?

Underground economy

62

What shortcoming of GDP is prostitution an example of?

Underground economy

63

What includes transactions that are not reported to the government, and therefore not taxed?

The underground economy

64

Does the underground economy only include illegal transactions?

No

65

What's an example of a legal underground economy transaction?

Waitress tips

66

Does the U.S. have a small or large underground(shadow) economy?

Small

67

How is macroeconomics different from microeconomics?

Microeconomics is the study of individuals and firms, but macroeconomics considers the entire economy

68

Does GDP measure both output and income?

Yes