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ECON100B > Midterm 1 > Flashcards

Midterm 1 Flashcards

1
Q

3 main indicators of macro

A

real GDP
unemployment
inflation

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2
Q

3 approaches of national income accounting

A

product: dollar amount of output produced

expenditure: dollar amount spent by purchasers

income: dollar incomes earned by production

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3
Q

fundamental identity of national income accounting

A

total production = total expenditure = total income

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4
Q

production approach: definition of GDP

A

the current market value of all final goods and services newly-produced in the domestic economy during a specified period of time

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5
Q

things to remember about production approach

A

most non-market goods and services not included

value-added as net profit on a product

capital goods treated as final goods since they are not used up (inventories also as final goods)

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6
Q

expenditure approach: definition of GDP

A

the total spending on all final goods and services produced in the domestic economy during a specified period of time

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7
Q

consumption approach: definition of GDP

A

the total spending by domestic households on final goods and services

categories: consumption, investment, government purchases of goods and services, net exports

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8
Q

3 components of consumption

A

consumer durable goods (lifetime >= 3 years)

consumer nondurable goods (lifetime <=3 years)

services

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9
Q

income approach: definition of GDP

A

the total income earned by individuals and businesses in the economy

categories: compensation of employees, other income, corporate profits, depreciation, net factor income

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10
Q

5 different income measures in the income approach

A

national income

GDP

GNP

private disposable income

net government income

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11
Q

national income

A

compensation of employees + other income + corporate profits

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12
Q

GNP

A

national income + depreciation

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13
Q

GDP

A

GNP + net factor payments

GNP - net factor income

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14
Q

private disposable income

A

GDP + net factor income + transfer payments from government + interest payments on government debt - taxes

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15
Q

net government income

A

taxes - transfer payments - interest payments on government debt

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16
Q

nominal vs. real values

A

nominal variables measured in current dollar terms

real variables adjusted for changes in price

nominal GDP = price * real GDP

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17
Q

price index

A

the average level of prices for a specified set of goods and services relative to the prices in a specified base year

18
Q

3 major price indices

A

the GDP deflator

the PCE deflator

CPI

18
Q

3 major price indices

A

the GDP deflator

the PCE deflator

CPI

19
Q

unemployment rate

A

percentage of civilian labour force willing and able to look for work, actively looking for work and are not currently employed

unemployed/labour force

20
Q

participation rate

A

labour force/population

21
Q

employment ratio

A

employed/population

22
Q

labour force

A

employed + unemployed

23
Q

interest rate

A

measures the cost of borrowing and the return to saving/lending

24
Q

why do interest rates differ?

A

maturity: difference in the length of the loan

credit risk

liquidity: how easy it is to turn the bonds/loas into cash

25
Q

Fisher equation

A

relationship between expected inflation, real interest rate and nominal interest rate

26
Q

supply/productivity shocks

A

occur if there is a change in the amount of output that can be produced with a given amount of capital and labour

27
Q

why do supply shocks occur?

A

technology shocks

natural environmental shocks

energy price shocks

significant financial shocks

28
Q

solow-swan’s focus

A

how the savings rate and labour force growth rate determine capital accumulation, which in turn affects economic growth

29
Q

assumptions of solow-swan

A

Cobb-Douglas production function

one commodity

national income identity Y=C+I

constant fraction of output saved (s)

capital depreciates at a constant rate

30
Q

capital accumulation equation solutions

A

general solution

steady-state solution (capital to efficient labour ratio not changing as a function of time)

31
Q

steady-state and per-capita income

A

gY/L = gE

32
Q

capital and labour are characterised by what properties that technology is not?

A

rivalry - only one person can use the factor at any given time

excludability - the owner of the factor of production can prevent others from using the factor

33
Q

key policy message of the romer model

A

rationale for government support of R&D to promote faster growth in output/worker

34
Q

why does the private sector spend too little rather than too much on developing new technologies?

A

technology as largely non-excludable

if you develop an idea, competitors focus on that

35
Q

government policies to promote productivity

A

building infrastructure

increasing human capital

encouraging R&D

36
Q

property rights

A

provide incentives/disincentives for undertaking investment and accumulation of capital

37
Q

business cycles

A

short-run fluctuations in aggregate economic activity around its long-run growth path

38
Q

4 parts of the business cycle

A

peak: maximum level of aggregate economic activity

trough: lowest level of aggregate economic activity

contraction/recession: period of time when aggregate economic activity is shrinking

recovery/expansion: period of time when aggregate economic activity is growing

39
Q

direction of co-movement

A

procylical

countercylical

acylical

40
Q

timing of co-movement

A

leading

lagging

coincident

not designated

41
Q

volatility of co-movement

A

higher

similar

lower

ECON100B (6 decks)

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