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Flashcards in Macroeconomics Deck (44):
1

Free-Market Flow Model

Government, Financial Sector, and Foreign Sector added. Concerned with flow of funds. Prior had individuals and business firms.

2

Free-Market Flow Model

Government, Financial Sector, and Foreign Sector added. Concerned with flow of funds. Prior had individuals and business firms.

3

What are leakages?

Individuals' income not spent on domestic consumption.
Taxes, savings, and imports

4

What are injections?

Additions to domestic production not from individuals.

Exports, gov spending

5

GDP?

Nominal Gross Domestic Product - Measures the total output of final goods and services produced fore change in the domestic market during a period. FINAL GOODS.

GDP does not include goods and services for which additional processing required
Illegal activities
There is no market exchange (volunteer DIY)
Goods produced in foreign countries by US owned entities...only DOMESTIC

Nominal is GDP not adjusted for prices

6

Two approaches of GDP measurement

1) Expenditures - Using final sales/purchases; the sum of pending by individuals, businesses, governments, foreign buyers (exports)

2)Income - measures GPD as value of incomes and resources' costs the sum of:

7

Real GPD?

Measures the total output of final goods and services produce for exchange in domestic market during a period at CONSTANT prices. Nominal GDP adjusted for changing prices (index)

Real GDP per capita = Real GDP/population; changes in standards of living

8

NDP - Net Domestic Product

Measures GDP less capital consumption (GDP-depreciation)

9

Potential GDP

Maximum output that can occur in domestic economy without creating upward pressure on general level of prices (inflation) - assumes full use of current resources and technology; estimated adjusting actual GDP

PRODUCTION-POSSIBILITY FRONTIER - Conceptual maximum amount of various goods and services an economy can produce at a given time

10

GDP Gap

Difference between Real GDP and Potential GDP

Real GDP Potential = Negative GDP GAP creates upward pressure on prices

11

GNP vs GDP

GNP - Measures total output of all goods and services produced world-wide using US resources; includes goods and services in foreign countries

12

NNP - Net National Product

Net National Product - Measures the total output of all goods and services produced worldwide using US resources but does not include depreciation (only includes cost of investment in new capital)

13

National Income (NI)

Total payments for economic resources included in the production of all goods and services

14

Personal Income (PI)

Measures total payments for economic resources received by individuals; PI = NI - Corporate profits - SS + Dividends and interest received by individuals + Government

15

PDI - Personal Disposable Income

Measures amount of income individuals have available for spending, after taxes are deducted from total personal

16

Employment/Unemployment

17

Frictional Unemployment

Those not employed because in transition; ex - moving to seek employment, those looking for job they believe meets their education or experience

18

Structural Unemployment

Need for prior types of jobs greatly reduced or eliminated; lack skills for currently available jobs

19

Cyclical Unemployment

Downturn in business cycle (economic - recession)

20

Unemployment Rate

Percentage of labor force not employed; natural unemployment rate = those unemployed due to frictional, structural, and seasonal reasons (will have this regardless of state of economy)

Full employment is only when there is no cyclical unemployment

21

What are leakages?

Individuals' income not spent on domestic consumption.
Taxes, savings, and imports

22

What are injections?

Additions to domestic production not from individuals.

Exports, gov spending

23

GDP?

Nominal Gross Domestic Product - Measures the total output of final goods and services produced fore change in the domestic market during a period. FINAL GOODS.

GDP does not include goods and services for which additional processing required
Illegal activities
There is no market exchange (volunteer DIY)
Goods produced in foreign countries by US owned entities...only DOMESTIC

Nominal is GDP not adjusted for prices

24

Two approaches of GDP measurement

1) Expenditures - Using final sales/purchases; the sum of pending by individuals, businesses, governments, foreign buyers (exports)

2)Income - measures GPD as value of incomes and resources' costs the sum of:

25

Real GPD?

Measures the total output of final goods and services produce for exchange in domestic market during a period at CONSTANT prices. Nominal GDP adjusted for changing prices (index)

Real GDP per capita = Real GDP/population; changes in standards of living

26

NDP - Net Domestic Product

Measures GDP less capital consumption (GDP-depreciation)

27

Potential GDP

Maximum output that can occur in domestic economy without creating upward pressure on general level of prices (inflation) - assumes full use of current resources and technology; estimated adjusting actual GDP

PRODUCTION-POSSIBILITY FRONTIER - Conceptual maximum amount of various goods and services an economy can produce at a given time

28

GDP Gap

Difference between Real GDP and Potential GDP

Real GDP Potential = Negative GDP GAP creates upward pressure on prices

29

GNP vs GDP

GNP - Measures total output of all goods and services produced world-wide using US resources; includes goods and services in foreign countries

30

NNP - Net National Product

Net National Product - Measures the total output of all goods and services produced worldwide using US resources but does not include depreciation (only includes cost of investment in new capital)

31

National Income (NI)

Total payments for economic resources included in the production of all goods and services

32

Personal Income (PI)

Measures total payments for economic resources received by individuals; PI = NI - Corporate profits - SS + Dividends and interest received by individuals + Government

33

PDI - Personal Disposable Income

Measures amount of income individuals have available for spending, after taxes are deducted from total personal

34

Employment/Unemployment

35

Frictional Unemployment

Those not employed because in transition; ex - moving to seek employment, those looking for job they believe meets their education or experience

36

Structural Unemployment

Need for prior types of jobs greatly reduced or eliminated; lack skills for currently available jobs

37

Cyclical Unemployment

Downturn in business cycle (economic - recession)

38

Unemployment Rate

Percentage of labor force not employed; natural unemployment rate = those unemployed due to frictional, structural, and seasonal reasons (will have this regardless of state of economy)

Full employment is only when there is no cyclical unemployment

39

Consumer Price Index (CPI)

Relates price of basket of goods and services during period to one in base period;

CPI-U most common - Consumer price index for all urban consumers (U)

Based period for 36 month period 1982 through 1984 - Base period == 100%

EX 1982-84 Base = 100%; 2012 = 229.6, 2013 = 233%

40

Inflation/Deflation

Rate of change in CPI-U measures; EX - 2013 = 233, 2012 = 229.6

2013 to 2013 change = 3.4 (change in CPI) not the rate of change; rate of change = 3.4/229.6 (original value) - 1.48% = 2013 rate of inflation

41

Wholesale Price Index (WPI)

Measure of deflation/inflation @ wholesale level

42

GDP Deflator

Relates nominal GDP to Real GDP; Attempts to include all spending in GDP - more comprehensive than CPI-U or WPI

"Basket" changes more frequently

GDP Deflator = nominal/real x 100

43

Inflation

Rate of increase in price level

44

Deflation

Rate of decrease in price level

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