Midterm #1 Flashcards
What is the current rate of unemployment? Is it favorable historically?
5.8%, this is favorable historically!
What is the rate of growth annually for real GDP?
1%
What % growth rate is needed to maintain a consistent unemployment rate?
1-2%
Understand the following annual growth rates;
0%
1-2%
2%
3%
0% is a shrinking economy and in a recession
1-2% is good to maintain a consistent unemployment rate
2% is good and sustainable
3% is hitting booms and not sustainable
What is inflation running at annually? Is this favorable?
3.4%, this is considered slightly unfavorable
What is the general paradigm / pattern in economics?
A certain paradigm dominates until the real world is at odds with those theories and so it loses credibility. This paves the way for a new paradigm to take place for a while until it loses its own credibility.
What are the three markets?
Output or product markets
Money or financial markets
Input or factor markets
What is the circular flow diagram?
a diagram that demonstrates how money is spent / gained throughout the macroeconomy. It shows that every dollar spent is a dollar made for someone else. It does NOT show how much or how little is being spent however. Only how the major groups of twos interact with one another.
What is the expenditure approach to finding GDP? What does it focus on? What is the formula?
The expenditure approach to finding GDP focuses on tracking spending (expenditures). The formula is GDP = C (consumption) + I (investment spending) + G (government spending) + X (export spending) - Im (imports)
What is the factor incomes approach to finding GDP? What does it focus on? What is the formula?
The factor income approach to GDP focuses on tracking earnings (incomes). The formula is GDP = wages, salaries, and other labor income + gross operating surplus + gross mixed income + indirect taxes – subsidies
Why might GDP / stats Canada be misrepresenting the country?
Well they could either
A) be overrepresenting it, as it does not include negative outcomes like climate change or other byproducts of our production. It additionally includes things that do not create economic value like justice services or national defense
B) be underrepresenting it, as it does not include black market or underground economic activities. This includes services that are not taxed or ran under the nose of stats Can.
What is the distinction between GDP per capita and the growth rate in real GDP?
The growth rate in GDP is a macroeconomic indicator that measures performance. By
how much is aggregate output shrinking or growing?
GDP per capita expresses the level of GDP in per person terms, and it is a widely used indicator of living standards of the
economy.
What is core inflation?
The core rate of inflation is based on a different basket of goods and services than the
overall rate of inflation. Starting with the market basic for the overall CPI, we remove
those goods – typically food and and energy commodities – whose prices are the most
volatile. The rate of core inflation is the rate of growth in prices of that collection of goods and services. As such, it is thought to be a better indicator of overall TRENDS in the cost of living that is unaffected by prices that fluctuate a lot.
How do you find real GDP using a deflator?
Real GDP = Nominal GDP in 20XX / deflator in 20XX *100. Aka divide the nominal GDP of that year by the deflator of that year, then multiply by 100.
Why do the totals from expenditure GDP formula and factors income GDP formula add up to be the same amount?
They are equal in magnitude, which should be the case. Every single $ that circulates in the macroeconomy has a dual identity of being both an expenditure and an income. One $ of spending necessarily represents one $ of income to be shared among the factors of production, and one $ of income earned necessarily represents one $ of spending.
