Chapter 9 Flashcards
(27 cards)
Long run economic growth
The process by which rising productivity increases the average standard of living .
Measured in real GDP per capita
Business cycle
Alternating periods of economic expansion and recession
Growth rates
2005 - 13,254. 2007- 13,312
13,312-13,254/ 13,254 * 100 = 4%
Rule of 70
If GDP is growing at 5% per year , it will double when?
70/5 = 14 yearsf
Years to double = 70/ growth rate
Labor productivity
The quantity of good and services that can be produced by one worker or by one hour of work
Capital
Manufactured goods that are used to produce other goods and services .example, computer, machine , ect
Capital stock
Amount of physical capital stock available in a country.
Capital per stock increases = worker productivity increases
Human capital
Accumulated knowledge and skills workers acquire from education and trading or life experiences
What influences economic growth ?
Technology changes
Technology
The process by which a firm uses to turn inputs to output doc goods and services
Entrepreneurs
Someone who operates a business bringing together factors of. Production to produce goods and services.
Vital for technological change
potential GDP
The level of real GDP Attained when all firms are producing at capacity * not maximum ( calculated using normal work force)
Financial system
The system of financial markets and financial intermediates through which firms acquire funds from households.
Financial markets
Markets where financial securities ( stocks bonds ) are bought and sold
Financial Sercurity
A document or electronic that states terms under which funds pass fro, buyer of Sercurity who is lending funds to seller
Stocks
Financial Sercurity that represents partial ownership of a firm
Bonds
Financial securities that represents promises to repay a fixed amount of funds
Financial intermediates
Firms such as banks , mutual funds, pension funds, and insurance companies , that borrows funds from savers and lend them to borrowers
Financial system has 3 services for savers and borrowers
Risk sharing, liquidity , information
How to calculate GDP
Y= C + I + G+ NX GDP = consumption + investment. + government purchases + net exports
Balance budget
Government spends same amount that it collects in taxes
Budget deficit
Government spends more than it collects in taxes
Market for loan able funds
The interaction of borrowers and lenders that determine the ,arrest interest rate and the quantity of loan able funds exchanged
Crowding out
A decline in private expenditures as a result of an increase in govern,ten spending