Quiz #4 Review Flashcards

1
Q

Gross Domestic Product (GDP)

A

value of all new production in a nation in a given period of time

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2
Q

Actual GDP (Y)

A

actual amount of production

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3
Q

Potential GDP (YF)

A

highest amount of production that an economy can achieve and sustain (based on the amount of available resources)

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4
Q

Y = YF

A

Healthy Economy

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5
Q

Y < YF

A

Resources Not Fully Used

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6
Q

Y > YF

A

Beyond Sustainability

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7
Q

Recession

A

actual GDP falls for two consecutive quarters or more

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8
Q

Depression

A

prolonged, deep decline in GDP

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9
Q

How does GDP relate to unemployment?

A

If the actual GDP falls below the potential GDP, then there is unemployment in the economy

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10
Q

Frictional Unemployment

A

enough jobs, but haven’t found a job yet. Happens because job search takes time

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11
Q

Structural Unemployment

A

enough jobs, but a mismatch between skills and jobs. Happens because economy grows/changes

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12
Q

Demand-deficient Unemployment

A

not enough jobs for all actively seeking unemployment (unhealthy economy)

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13
Q

Natural Rate of Unemployment

A

sum of frictional and structural rates

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14
Q

Why do some argue that the unemployment rate understates the true amount of unemployment in the economy?

A

discouraged worker, underemployed (high skill but are working in a low skill job)

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15
Q

Price Level

A

an aggregate measure of prices in the economy

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16
Q

Inflation

A

the price level rises, purchasing power of money falls

17
Q

Deflation

A

the price level falls, purchasing power of money rises

18
Q

Nominal value

A

a value measured in current dollars, does not account for changes overtime

19
Q

Real value

A

a value measured in constant dollars overtimes, accounts for changes overtime

20
Q

Consumer Price Index (CPI)

A

measures price changes of goods the typical household buys (most widely used measure of inflation)