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Semester 2 Year 1 > Macroeconomics 1 > Flashcards

Macroeconomics 1 Flashcards

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1
Q

Canadian GDP

A

~$3 trillion per year

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2
Q

Canadian GDP per capita

A

~$73,000 per year

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3
Q

nominal GDP

A

normal GDP number

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4
Q

real GDP

A

nominal GDP adjusted for inflation by being pegged to a year

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5
Q

mea culpa

A

massive failure that explains why specific events happen but not how the general macroeconomy works

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6
Q

macroeconomic institutions

A

abstract structures created by humans to govern daily affairs. banking, monetary systems, social safety

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7
Q

PPP

A

Purchasing Power Parity: designed to show how much the average citizen of a country can buy in a year

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8
Q

models

A

designed to show how things work

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9
Q

S&D

A

supply and demand

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10
Q

P&Q

A

price and quantity

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11
Q

3 primary markets of macroeconomics

A

output market of goods and services
money market
employment market

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12
Q

Q&P for output market for goods and services

A

a part of the real economy (tangible goods and services)
quantity = GDP
price = composite price level (inflation rate)

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13
Q

Q&P for employment market

A

real economy
quantity = employment
price = wage level

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14
Q

Q&P of money market

A

not part of the real economy (money is a medium of exchange)
quantity = money circulating in economy
price = interest rate and foreign exchange rate

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15
Q

recession

A

GDP growth is negative

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16
Q

why are interest rates volatile

A

uncertainty causes supply to fall pushing up interest rates

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17
Q

why are exchange rates volatile

A

in canada, our economy is based around resources whose price fluctuates

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18
Q

flow quantity

A

amount per unit of time (amount of water passing through)

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19
Q

stock

A

amount observed at a point in time (volume of water in tank at one point)

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20
Q

circular flow model

A

structure of macroeconomy using two by two by two version

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21
Q

two types of markets

A

factor market (input)
goods and services market (output)

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22
Q

two types of actors

A

households
producers (firms/businesses)

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23
Q

two types of flow denominated in $

A

income flows from factor services rendered
expenditure flows from goods and services produced

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24
Q

why do dollars have a double identity

A

income (money made) and expenditure (money spent) so total (aggregate) income = total (aggregate) expenditure

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25
national accounting
measure GDP
26
two approaches to national accounting
expenditure approach income approach
27
four types of spending jn the expenditure approach to national accounting
consumption spending investment spending net export spending (exports-imports) government spending
28
GDP=
consumption + investment + government + exports - imports
29
what leaks from circular flow
imports
30
what is injected in circular flow
exports
31
types of investments
residential plant and equipment inventory accumulation (a flow)
32
it is not the identity of the spender that matters
but rather the nature of the good or service being purchased
33
(formula) factor income approach
Y (income)/national income = factor payments + indirect taxes - subsidies
34
factory payments include
salaries and wages rent interest, dividends, capital gains to investors profits to entrepeneurs
35
indirect taxes
PST, GST, HST, etc incurred only upon action of purchase
36
it is not the identity of the earner that matters
but rather the manner in which the income is earned
37
apogee
GDP = Y/national income
38
GDP is not measured by volume but by
value
39
what is value
volume produced + prices
40
why does nominal GDP rise
prices rise production increases
41
why does real GDP rise
production rises
42
price deflator
measures inflation
43
deflator formula
deflator = (nominal GDP / real GDP) * 100 real GDP = (nominal GDP / deflator) * 100
44
% change nominal =
% change real + inflation rate
45
inflation rate =
((deflator year 2 / deflator year 1) - 1) * 100
46
why can GDP underestimate economic welfare
does not account of underground economy (all untaxed, not all illegal) non-market activities that are reported but not traded or valued does not reflect leisure
47
why can GDP overestimate economic welfare
misses economic bads such as pollution activities that do not improve welfare are included such as national defence and criminal justice
48
left-wing view of GDP growth
if the pie grows bigger but the general publics slice of the pie stays the same then what is the point of growing the pie
49
right-wing view of GDP growth
if the pie grows bigger our slice of the pie is destined to increase with it (trickle down)
50
CPI
consumer price index measures the cost of living
51
GDP deflator
represents price of all goods that are produced domestically
52
what does the percentage change in CPI or GDP deflator represent
change in inflation
53
GDP deflator starts at a base of
100
54
find the GDP deflator for year 10 when given previous year and inflation rate: year 9: 125.1 inflation: 1.1%
GDP deflator year 10 = GDP deflator year 9 x (1 + inflation rate) GDP deflator year 10 = 125.1 x (1 + 0.011) Answer = 126.5 (rounding up)
55
find cumulative inflation year 9: 125.1
(125.1 / 100 - 1) * 100 = 25.1%
56
annual rate of inflation is 2% how much higher would it be over 10 years
((1.02)^10 - 1) * 100 = 21.9%
57
interest rate of 10% over 12 years starting with $1
((1 + 0.1)^12 - 1) * 100 = 213% or an increase of $2.13 total amount: $3.13 ($1 beginning + 2.13 interest)
58
Core inflation
CPI without goods that fluctuate the most (such as energy) reflects longer-term trends in consumer prices
59
Commodity substitution bias
Statistics Canada uses a fixed basket which doesn’t measure for price changes
60
Introduction of new goods
New products make people have to spend less for the same level of quality of life which is not reflected in
61
Unmeasured quality change
changes in quality are difficult to measure compared to the price
62
GDP deflator vs CPI
Deflator accounts for goods produced domestically + current price of goods CPI accounts for things bought by consumers
63
Tiger country
Poor country that has rapid economic growth
64
Change in CPI formula
Adjusted amount = original amount * (current CPI/past CPI)
65
Primary causes of economic growth and prosperity
Endowment and Productivity
66
Endowment
How “endowed” is your country with land, labour, etc
67
Productivity
Efficiency Output divided by input (how much can you make per hour of work, how much can you make out of one resource, etc.)
68
Our living standards and prosperity depend on this
Productivity
69
Name the four determinants of productivity
Human capital Physical capital Natural capital Technological capital
70
Human capital
Knowledge and skills of the public
71
Physical capital
objects made to make you more productive (shovelling snow vs using your hands)
72
Natural capital
resources in your country
73
Technological capital
self explanatory
74
What is a pro-growth public policy
Policies implemented to increase productivity such as education, outside investment
75
saving and investment
not spending currently (forgo) so you can invest, which augments the capital stock
76
decreasing marginal returns (catch up effect)
when economy has low levels of capital, extra units of capital make a bigger difference than the same amount would make to an economy with a higher level of capital
77
Education
Human capital, involves literacy rates, numeracy rates, computer literacy, training, university, professsional
78
Property rights
the ability of people to determine the use of the resources that they own
79
Economics prosperity depends in part
on political prosperity
80
Free trade
Mostly agreed to be a good thing to the economy
81
Technological change and innovation
creates jobs rather than destroying them Can contravene onset of diminishing returns to capital
81
in order for technological innovation to be helpful to the economy it must be
diffused (widely used)
82
Malthus’ theory of population
incorrect assessment that people like having sex too much and we will run out of food for all of the offspring
83
Kremer hypothesis
higher populations grows, more likely someone invents something that progresses us

Semester 2 Year 1 (12 decks)

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