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Micro Econ > Macro Midterm > Flashcards

Macro Midterm Flashcards

1
Q

Aggregate Output:

A

everything that is produced within a country

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2
Q

Potential Output

A

Y* amount of goods/services an economy could produce (assumes everyone who wants to work is working 40 hour weeks and full use of capital)

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3
Q

Y*

A

potential output

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4
Q

Y

A

actual output

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5
Q

recessionary gap

A

Y* > Y

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6
Q

Inflationary gap

A

Y > Y*

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7
Q

employement

A

anyone over the age of 15 who has a job

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8
Q

Cyclical unemployment:

A

caused by recession/business cycle

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9
Q

Frictional unemployment

A

moving between jobs

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10
Q

Structural unemployment

A

mismatch of skills

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11
Q

labor force

A

number of people employed + unemployed

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12
Q

Unemployed people

A

Does not include: discouraged (given up) workers, students, retired people

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13
Q

Employment rate

A

people employed / labor force * 100

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14
Q

Labour participation rate

A

labour force / adult population

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15
Q

Calculating GDP

A

value added (avoids double counting), expenditure (formula) income approach

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16
Q

Income approach

A

wages + profits + interest payments + indirect taxes - subsidies + depreciation

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17
Q

CPI negatives

A

OVERSTATES inflation

Does not measure quality change, introduction of new goods, or substitution effect

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18
Q

Formula for percentage change

A

new - old / old * 100

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19
Q

CPI Steps

A

Calculate consumption in each year (using base year quantities)
Calculate CPI in each year = total cost (year) / total cost (base year) * 100
Inflation = CPI (year 2) - CPI (year 1) / CPI (year 1) * 100

20
Q

GDP approach inflation

A
  1. Calculate nominal GDP in each year (price * quantity) and add
  2. Calculate real GDP for each year (keep price constant and change quantity)
  3. GDP deflator for each year = nominal GDP / real GDP * 100
    Inflation = new deflator - old deflator / old deflator * 100
21
Q

C formula

A

C = a + bYd

22
Q

MPS

A

Z - slope of AE function

23
Q

AE = A + zY

A

A is autonomous expenditure, Z is MPS or induced expenditure

24
Q

Nx

A

X0 - mY

25
Q

Simple multiplier

A

1 / 1-Z (steepter = bigger Z = bigger multiplier)

26
Q

How to calc changes?

A

△ Y = △ in A * simple multiplier (1 / 1-Z)

27
Q

Fisher effect

A

i = r + pie^e

28
Q

Shifts in AE

A

change in a, I, G, X

29
Q

Change in AE Slope

A

change in MPC, tax, MPI

30
Q

Change in Price level

A

shifts AE up (if decrease in PL), move along AD

31
Q

Large Z

A

Steep AE = flat AD curve, large shifts (unstable)

32
Q

Small Z

A

Flat AE = steep AD, small shifts (stable)

33
Q

Multiplier

A

distance between new and old equalibrium (= A * mult (change in Y / change A)

34
Q

Simple mult

A

distance between AD curves after shift (constant PL) = change A/1-z

35
Q

Automatic Stablizers

A

increase tax, decrease MPC, increase MPI (they make Z smaller)

36
Q

Supply Shocks

A

NEG = left, pos = right - tech, factors of production

37
Q

Negative Demand Shocks

A

left shift - downward pressure on wages (slow due to sticky wages)

38
Q

Demand shock causes

A

change in I (interest rates), G or tax (fiscal policy) or exports

39
Q

Positive demand shock

A

right - upward pressure on wages, they rise until equalbrium

40
Q

Automatic (economy on its own)

A

AS shifts wages until equalibrium

41
Q

Policy changes

A

Shift AD curve to equalbirum - not exact or long tern

42
Q

National savings

A

Y - C - G

43
Q

Private savings

A

Y - T - C

44
Q

Public Savings

A

T - G

45
Q

Neoclassical Growth theory

A

diminishing marginal returns (keep 1 constant), constant returns to scale (change both, output should change the same amount)

46
Q

If population increases

A

GDP increases, living standards decrease

47
Q

Constant returns mean

A

no change in living standards, increase in GDP

Micro Econ (3 decks)

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