Module 2: Economic Measures and Indicators Flashcards Preview

BEC Unit 5 > Module 2: Economic Measures and Indicators > Flashcards

Flashcards in Module 2: Economic Measures and Indicators Deck (30)
Loading flashcards...
1
Q
Expenditure Approach (GDP) Sum of Following:
--(Flow of Product)
A
  • Government purchases of goods and services
  • Investment
  • Personal consumption
  • Net Exports
  • —(GICE)
2
Q
Income Approach (GDI) Sum of Following:
--(Earnings and Costs)
A
  • Income of proprietors
  • Profits of Corps
  • Interest
  • Rental Income
  • Adjustments
  • Taxes
  • Employee compensation
  • Depreciation
  • —( I PIRATED)
3
Q

Net Domestic Product

A

GDP minus Depreciation

4
Q

Gross National Product

A

Market value of final goods and services produced by residents of a country in a given time period
–Differs from GDP because GNP includes goods and services that are produced overseas by US firms and excludes goods and services that are produced domestically by foreign firms

5
Q

Net National Product

A

GNP minus economic depreciation

6
Q

Personal Income

A

Income received by households

7
Q

Disposable Income

A

Personal Income less personal taxes. Amount of income households have available either to spend or save

8
Q

Unemployment Rate

A

Ratio of number of unemployed people to the total labor force.
–Total labor force includes all non-institutionalized individuals 16 yrs or older who are either working or looking for work

9
Q

Unemployment Rate Formula

A

(Number of unemployed / Total Labor Force) x 100

–Total Labor Force excludes those who choose to be unemployed

10
Q

Frictional Unemployment

A

Normal unemployment stemming from ppl changing jobs (usually younger ppl)

11
Q

Structural Unemployment

A

Unavailability, Lack of skills, change in technology

12
Q

Seasonal Unemployment

A

Holidays (christmas)

13
Q

Cyclical Unemployment

A

Results from declines in real GDP during periods of recession when economy fails to meet its potential

14
Q

Natural Rate of Unemployment

A

Sum of frictional, structural, and seasonal unemployment or the employment rate that exists when the economy is at its potential output level

15
Q

Inflation

A

Sustained increase in prices

–Inverse relationship with purchasing power

16
Q

Deflation

A

Sustained decrease in prices

  • -Deflation is seen as a much bigger problem than inflation
  • -During deflation, firms are likely to have excess production capacity
17
Q

Consumer Price Index

A

Measure of overall cost of a fixed basket of goods and services purchased by an average household
– (Current Cost of market basket / Base year cost of market basket) x 100

18
Q

Inflation Rate

A

Percentage change in CPI from one period to the next

–(Change in CPI / CPI last period) x 100

19
Q

Producer Price Index

A

Measures overall cost of a basket of goods and services typically purchased by firms

20
Q

Real Interest Rate

A

Driven by supply and demand for loanable funds

–Nominal Interest Rate - Inflation Rate

21
Q

Money Supply

A

All liquid assets available for transactions in the economy

22
Q

M1

A

Coins, currency, checkable deposits, and traveler’s checks

23
Q

M2

A

M1 + time certificates of deposits less than 100,000, money market deposit accounts at banks, mutual fund accounts, and savings accounts

24
Q

M3

A

All items in M2 as well as time certificates of 100,000 or more

25
Q

Federal Reserve

A

Open Market, Discount Rate, and Reserve Requirement

26
Q

Open Market Operations

A

Consists of purchase and sale of government securities

  • -Purchase gov’t securities INCREASES money supply
  • -Selling gov’t securities DECREASES money supply
27
Q

Discount Rate

A

Interest rate the Federal Reserve charges member banks for short-term loans

  • -RAISING discount rate DECREASES money supply
  • -LOWERING discount rate INCREASES money supply
28
Q

Reserve Requirement

A

RAISING it DECREASES

LOWERING it INCREASES

29
Q

Expansionary Monetary Policy

A
  • -An increase in money supply means int. rates fall
  • -Falling interest rates reduce cost of capital
  • -Increase in desired investment causes an increase in demand
  • -Demand shifts to right, real GDP rises, unemployment falls, prices rise
30
Q

Contractionary Monetary Policy

A

Opposite of Expansionary