Economics 3 Flashcards Preview

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Flashcards in Economics 3 Deck (15):

What is Real GDP?

Nominal GDP / GDP Deflator x 100


What is Gross National Product (GNP)?

Like GDP; Swaps foreign production. US Firms overseas are included- Foreign firms domestically are not included


What is the Consumer Price Index (CPI)? How is it applied?

Price of goods relative to an earlier period of time- which is the benchmark. Year 1 : 1.0

((CPI Current - CPI Last) / CPI Last) * 100


How is disposable income calculated?

Personal Income - Personal Taxes


How is Return to Scale calculated?

% Increase in output / % Increase in input

Greater than 1 : Increasing returns to scale

Less than 1 : Decreasing returns to scale


When is the economy in Recession?

When GDP growth is negative for two consecutive quarters.


What is a Depression?

A prolonged- severe recession with high unemployment rates

No requisite period of time for the economy to officially be in a depression


What are the stages of the Economic Cycle?

Peak (highest)
Recession (decreasing)
Trough (lowest)
Recover (increasing)
Expansion (higher again)


What are leading indicators?

Conditions that occur before a recession or before a recovery

Example: Stock Market or New Housing Starts


What are lagging indicators?

Conditions that occur after a recession or after a recovery

Examples: Prime Interest Rates- Unemployment


What are coincident indicators?

Conditions that occur during a recession or during a recovery

Example: Manufacturing output


Which people are included in the calculation of unemployment?

Only people looking for jobs


What is Cyclical Unemployment?

GDP doesn't grow fast enough to employ all people who are looking for work

Example: People are unemployed in 2010 because there aren't enough jobs available due to the economy


What is Frictional Unemployment?

People are changing jobs or entering the work force. This is a normal aspect of full employment.

Example: A recent college graduate is looking for a job


What is Structural Unemployment?

A worker's job skills do not match those necessary to get a job so they need education or training

Example: A construction worker wants to work in an office- so they quit their job and get computer training