Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

Macro > Productivity Output And Employment > Flashcards

Productivity Output And Employment Flashcards

(82 cards)

Start Studying
1
Q

What is production function =

A

Y= AF(K,N)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Two main properties of production function

A

Slopes upwards - more input produces more output

Slope become flatter - diminishing marginal product as input increases

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Assumptions of MPK

A

MPK is positive

MPK declines as k increases

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Assumptions for MPN

A

Always positive

MPN declines as N increases

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What does an increase in A imply

A

Increase in MPK /MPN

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What happens to MPN when k rises

A

MPN also rises

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Supply shock

A

Change in economy production function.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What do I supply shocks affect

A

The amount of output that can be produced for given quantities of labour and capital

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Supply shock examples

A

Technology innovation

Discovery of new oil reserves

Changes in oil price

Changes in governments regs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What does a positive supply shock do

A

Increase the values of both MPK and MPN

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Hat does a positive supply shock do to parameter A

A

Increase productive parameter A

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

How much labour do firms choose to use

A

Hold capital fixed and do analysis

Compare similar workers and firms

Whether labour market is competitive

To max profits

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Short run time horizon

A

The time period during which aggregate output and employment can change but before prices and wages respond to changes in economy wide output and employment levels

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Short form of short run time horizon

A

Economy’s price level and wage rate do not change to macroeconomic conditions and policies in short run

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Real wage rigidity

A

Real wage rate moves too little in response to aggregate labour market

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Price stickiness

A

Tendency of prices to respond slowly to changes in economy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Medium run time horizon

A

Time period during which prices and wages can respond to changes in aggregate output and employment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What can be investigated in medium run analysis

A

Consequences of changes in technology

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What can long run analysis do

A

Investigate the causes of productivity growth and why it might change

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Long run analysis

A

We allow for growth in the population, capital stock and improvement in tech

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Firms profit function =

A

Price * output - nominal wage* labour

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Derivative of profit with respect to labour =

A

Price* MPN - nominal wage

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Optimality condition for MPN =

A

Nominal wage / price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

When MPN > nominal wage =

Or when MRPN > w

A

Increase quantity of labour demanded

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
When MPN< w Or MRPN< w
Reduce quantity of labour demanded q
26
Labour demand curve
Shows the relationship between the real wage rate and the quantity of labour demanded
27
What is the labour demand curve equal to
MPN curve
28
How do we plot MPN curve
MPN on y axis Real wage on x axis
29
What is equilibrium on MPN curve
When MPN = w
30
What does a beneficial supply shock do to MPN and labour demand curve
Raises MPN so labour demand curve shifts to the right MPN curve shifts up and to the right
31
What does higher capital stock do
Raises MPN so shifts labour demand curve to the right MPN shifts up and right
32
What does a change in nominal or real wage rate do
Causes movement along labour demand curve, not a shift of the curve
33
Aggregate labour demand
Sum of all the firms labour demand
34
What is labour supply determined by
Individuals
35
What is given when individuals choose labour supply
Real wage rate
36
What is maximised for labour supply
Utility
37
What does individuals utility depend on
Consumption and leisure
38
What does time =
Work time plus leisure time
39
Costs of working an extra day
Increase work time = decrease leisure time= decrease utility
40
Benefits of working xtra day
Ioncrease work time = increase income = increase utility
41
Why would you keep working
When benefit exceeds the cost
42
What is substitution effect
Higher real wages encourages work as opp cost of leisure time is higher
43
Income effect
Increase in real wage increases wage for same amount of work time so the person can afford more leisure so they supply less labour
44
Pure sub effect
One day rise in the current real wage
45
What does a temporary real wage increase do
Increase in work time and a fall in leisure
46
What’s does temporary real wage change have little effect on
Lifetime resources
47
Lifetime resources =
Wealth + expected future wealth+ lifetime labour income
48
Pure income effect
An increase in wealth
49
What does an increase in wealth not have an effect on
Sub effect
50
What does winning the lottery mean
Take more leisure and consume more goods = pure income effect
51
What does a longer lasting higher wage mean
Stringer income effect so less labour supply
52
What dominates temporary increase in real wage
Sub effect
53
What dominates with permanent increase in real wage
Income effect
54
What do you do on labour supply curve when current real wage changes
Move along curve
55
What happens if any other factor chnasges the amount of labour supplied on labour supply curve
Whole labour supply curve shifts
56
What 2 things shift labour supply curve negatievly
Increased wealth and expected future real wage
57
Why does aggregate labour supply increase along the curve when current real wage increase
Some people work more hours More people Exeter the workforce
58
Why does aggregate labour supply curve shift to the right
Decrease in wealth Decrease in expected fututure wealth Increase in labour force participation
59
What happens when there’s deviation form equilibrium in competitive labour market
Real wage rate adjust quickly to bring market back to equilibrium
60
What is there none of in competitive labour market
No involuntary unemployment
61
Who are the only people unemployed in a competitive labour market
Those who are voluntarily unemployed
62
What is labour force (NF)
Max amount of labour that can be supplied
63
What happens when wage is higher than equilibrium wage in competitive labour market
Excess supply of labour
64
Full employment output level is when …
The labour market is in equilibrium
65
What does a temporary adverse supply shock do
Reduces the demand for labour Lowers output directly = reduction in A
66
Example of adverse demand shock and what did it do
Oil price sharp increases Lowers labour demand, employment, real wage and output
67
Labour force definition
Those who are able to work and want to work
68
Labour force =
Employed + unemployed
69
Adult population =
Labour force + §not in labour force
70
Unemployment rate =
Number of unemployed/ labour force
71
Participation rate =
Labour force / adult population
72
Employment ratio
Employed/ adult population
73
Why does unemployment rate never reach zero
Frictional and structural unemployment
74
Contrary to classical approach what is there at equilibrium point in competitive labour market
Involuntary unemployment
75
Frictional unemployment
Unemployment that arises when individuals search for a job or firms search for individuals Or Joblessness when people are entering workforce after an absence or it’s their first time
76
Structural unemployment
Arises when mismatch between workers skills and firm requirements Or between workers locations dn firms location
77
Where does structural unemployment arise from
Structural changes in economy = old industries replaced with new ones that require diffferent skills or located in different area
78
Chronically unemployed
Workers who are unemployed a large part of the time usually die to lack of skills
79
Cyclically unemployed
Unemployment caused by business cycle
80
Natural rate of unemployment
Employment rate when output and employment are at full employment levels
81
What is natural rate of employment =
Frictional and structural unemployment
82
Cyclical unemployment =
Actual unemployment - natural unemployment

Macro (5 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions