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Flashcards in Test 2 Deck (39)
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1
Q

GDP

A

Total dollar value of all final goods and services produced in the economy in a one year period

2
Q

Current dollars

A

Nominal GDP, because it uses current prices in that year

3
Q

Constant Dollars

A

Real GDP, because real GDP puts prices on each years Q’s, using base year prices

4
Q

Intermediate goods

A

Goods that are like a car radio or leather seats. Not included in GDP

5
Q

Non productive transactions

A

Are excluded from GDP. There are three…financial transactions involving bonds, second hand sales, and transfer payments

6
Q

Expenditure Approach

A

Add up all expenditures on the final goods/services produced

7
Q

Income Approach

A

Add up all of the income generated by the production of the goods/services

8
Q

-Factors of expenditure approach

A

f

9
Q

Personal Consumption expenditures

A

All expenditures by household of all goods/services

10
Q

Government Purchases of goods/services

A

Includes expenditures of all levels of government on goods/services

11
Q

Gross Private Domestic investment

A

When goods are produced tho year but not consumed till later

12
Q

Net exports

A

Dollar value of the goods we export minus dollar value of goods we import

13
Q

C+I+G+(X-M)

A

Formula

14
Q

Economic Growth

A

An increase in real per capita GDP

15
Q

“Catch-up effect”

A

Underdeveloped countries have a higher growth rate than developed industrial nations

16
Q

New Growth Theory

A

Focuses on technology, research and innovation

17
Q

Property Rights

A

Encourages economic growth

18
Q

“Industrial Policy”

A

Government should support industries and technology of the future using taxes + subsidies

19
Q

-Increase in technology creates more jobs in the long run

A

s

20
Q

Real balance effect

A

As price level rises, purchasing power of money declines

21
Q

Interest Rate Effect

A

As price level rises, interest rates tend to rise

22
Q

The open economy effect

A

As price level in U.S. rises, U.S. goods are more expensive then foreign goods

23
Q

AD factors to shift curve

A

Households become more optimistic and spend more. (increases) Businesses become more pessimistic and spend less on tools (decreases). Fed. gov. increases spending on real goods (increases)

24
Q

-Change in input prices causes a SRAS shift

A

s

25
Q

Natural Rate of unemployment

A

Includes everything but cyclical. In long run, forces eliminate cyclical.

26
Q

Factors to shift LRAS

A

Improvement in Tech, inrease in resources

27
Q

Aggregate Demand curve shock

A

Whenever AD shifts

28
Q

Expansionary Gap

A

Points in-between GDPf and GDP2

29
Q

Recessionary Gap

A

Where GDP decreases.

30
Q

Demand Pull inflation

A

An increase in the AD

31
Q

Cost push inflation

A

Inflation resulted from a reduction in the SRAS

32
Q

Stagflation

A

Real GDP is declining, while price is increasing

33
Q

Classical Model

A

Assumes product + Input prices are flexible in SR

34
Q

Keynesian Model

A

Assumes product + input prices are fixed in SR

35
Q

Modern Keynesian Model

A

Assumes products prices are flexible and input prices are fixed in SR

36
Q

Says law

A

Supply creates its own demand.

37
Q

Argument against says law

A

If there is saving, says law is false

38
Q

Classical View

A

Wage flexibility brings economy to full employment fast and will stay there. As wage rate falls, unemployment eliminates. AS determines level of employment

39
Q

Keynesian View

A

Didn’t believe in Says Law, higher income=higher saving, in real world wage rates don’t fall. AD determines level of employment