Midterm 2 Flashcards
(41 cards)
Labor force size =
number employed + number unemployed only
unemployment
Number unemployed / Labor force * 100
labor force participation
labor force / adult population * 100
difference between frictional and structural unemployment
frictional occurs because you’re actively looking or swapping jobs structural occurs because of the absence of demand of a certain type of worker from outsourcing or tech
natural unemployment =
frictional + structural unemployment
how do you calculate gdp deflator
gdp deflator = nominal gdp / real gdp * 100
CPI =
price this year / price base year
how to calculate inflation from previous year
cost year - cost prev / cost prev * 100
What’s the rule of 70
takes 70/growth rate years to double RGDP
change in GDP
= Technology + 1/3 delta K / k (qty capital) + 2/3 delta L / L (labor)
What is most important to growth
institutions, then technology once established
AE =
C + I + G + X - IM where I is planned investment
Planned investment =
actual change in investment - unplanned change
When change in AE < GDP
inventories rise and employment falls
When change in AE > GDP
Inventories fall and employment rises
Consumption =
a + MPC (Y-T)
MPC =
change in consumption /change in income
What’s on the AE model
national income on x axis, AE on y axis keynsian cross for 1:1 Y = AE
Unplanned investment =
Y (AS) - AE
Fiscal policy uses
G, T
delta AE = 1/1-MPC * delta G
delta AE = -MPC/1-MPC * delta T
Monetary policy uses
monetary supply
delta AE = 1/1-MPC * delta I
What’s the weath effect
consumption increases lower prices, nominal assets have more purchasing power
Interest rate effect
lower prices, less money to buy stuff -> more money in bank so more loanable funds and more investment demand
When is SRAS shifted
shifts with costs of production, right if wages fall or productivity rises or commodities fall
