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ECON 102 > week 14 > Flashcards

week 14 Flashcards

1
Q

how is the state of the economy measured

A

GDP
the market value of final goods and services produced in a country in a given period
aggregate quantities of many goods and services by adding up market values

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2
Q

why has GDP been critised

A

does not accurately reflect factors such as distribution of income and the effect of economic growth on the environment

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3
Q

what is GDP

A

the market value of final goods and services produced in a country in a given time period

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4
Q

what is market value

A

convenient way to aggregate the many different goods and services produced in a modern economy

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5
Q

what are non-market goods included in GDP

A

government goods and services are not sold in the market
increase output, have known quantities but unestablished prices
are included in GDP

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6
Q

what are final goods and services

A

consumed by the ultimate user
end products in production
included in GDP

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7
Q

what are intermediate goods and services

A

used up in production of final goods
not included in GDP to avoid double counting

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8
Q

what is a capital good

A

a good that can be final and intermediate, a long lived good which is produced and produces other goods and services
eg machinary

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9
Q

what is value added

A

market value of product - cost of inputs from other firms

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10
Q

what are the four categories in GDP

A

households
firms
governments
foreign sector

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11
Q

how can GDP be calculated

A

adding up market value of all the final goods and services produced domestically
or
adding up total amount spent by each of the four groups on final goods and services and subtracting imported goods and services

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12
Q

what is consumption expenditure

A

spending by households for goods and services

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13
Q

what are consumer durables

A

long lived consumer goods
cars, furniture

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14
Q

what are consumer non-durables

A

shorter lived goods
clothing, food

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15
Q

what are services

A

largest component of consumer spending
education, haircuts

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16
Q

what is investment

A

spending by firms on final goods and services

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17
Q

what is business fixed investment

A

purchases of new capital goods
eg property

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18
Q

what is residential investment

A

construction of new homes and apartment buildings

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19
Q

what is inventory investment

A

change in unsold goods to the company’s inventory
goods that are produced but not yet sold
can be positive or negative

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20
Q

what is financial investment

A

purchases of stocks, bonds and financial assets
does not correspond to increases in production capacity in most cases (new stock issues is the exception)

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21
Q

what is economic investment

A

the increase in the capital goods used to produce other goods
value based on purchase price of capital goods not stock value

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22
Q

what are government purchases

A

final goods and services bought by national and local governments
excludes transfer payments

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23
Q

what are transfer payments

A

made by governments, but the government receives no goods or services
eg social security

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24
Q

how do you calculate net exports

A

exports - imports

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25
what are exports
goods and services produced domestically and sold abroad
26
what are imports
goods and services produced abroad and purchased domestically
27
what is the GDP expenditures equation
Y = C + I + G + NX Y - GDP/output C - consumption expenditure I - Investment G - government purchases NX - net exports
28
what is the income approach to GDP
GDP = labour income + capital income labour income is wages, salaries and benefits capital income is physical capital and intangibles such as profits, rent
29
what is real GDP
a measure of GDP in which the quantities produced are valued at the prices in a base year, rather than at current prices measures actual physical volume of production
30
what is nominal GDP
a measure of GDP in which the quantities produced are valued at current-year prices measure current money value of production
31
what are the observations on real and nominal GDP
nominal and real usually increase each year nominal can go up and real go down (fewer goods and services produced and prices increase faster than output decreased) nominal GDP will be smaller than real GDP if prices are less than in base year real GDP could rise and nominal fall but this is rare
32
how does GDP effect economic wellbeing
GDP captures only those goods and services that are sold in markets leisure is not sold in markets GDP may understate economic wellbeing real GDP may be flawed measure of well-being it only values market transactions maximising GDP will not necessarily maximise national well-being
33
what are nonmarket economic activities
household production and volunteer services difficult to value these services important in poor countries
34
what is the underground economy
all unreported transactions, legal and illegal includes casual labour that is often paid in cash and services such as drug dealing and prostitution not included in GDP
35
what is environmental quality
clean up activities to restore the environment to its original condition, included in GDP gets environment back to starting point deterioration in the quality of air and water would more than offset the gains from greater production
36
what is resource depletion
no adjustment is made for the decline in resource availability when mining or other harvesting is done environmental quality and resource depletion are difficult to value
37
what are some intangibles GDP does not account for
crime rates traffic congestion civic organisations open space sense of community
38
why does GDP not capture the effects of income inequality
cannot differentiate between an unequal and an egalitarian society if they have similar economic sizes policymakers need to account for rising inequality when making decisions
39
what are the limitations of GDP
does not tell us about personal wellbeing, depletion of natural resources, quality of life or ecological deficit short term growth leads to long term damage to our health, wealth and wellbeing
40
what features of GDP can be used as a welfare measure
material standard of living - more goods and services health and life expectancy - improved health measures in industrialised countries education - literacy and school enrolment rates
41
what is the kuznets curve
the relationship between economic growth and inequality initial stage of economic growth - inequality increases as investment opportunities create a wealthy class further industrialisation - democratisation, increases in education cause inequality to decline
42
what is the labour force
the total number of people employed and unemployed in the economy employed + unemployed
43
how do you calculate unemployment rate
unemployed / labour force
44
how do you calculate participation rate
labour force / population 16+
45
what does it mean if you are employed
you work full or part time or are on sick or vacation leave from a regular job
46
what does it mean if you are unemployed
not employed but are actively seeking employment
47
what does it mean if you are out of the labour force
you are not employed or actively seeking employment
48
what is unemployment rate
the percentage of the labour force classified as unemployed
49
what is participation rate
the percentage of the working population in the labour force
50
what are the three types of unemployment
frictional, structural and cyclical
51
what is structural unemployment
the long term and chronic rate of unemployment that exists even when the economy is producing at the normal rate
52
what can cause structural unemployment
lack of skills language barriers discrimination economic changes can create long term mismatch between jobs and skills
53
what are the costs of structural unemployment
causes loss of income to workers and loss of output for firms
54
what is frictional unemployment
short term unemployment associated with the process of matching workers with jobs can take time
55
what is cyclical unemployment
extra unemployment that occurs during recessions occurs when the economy experiences a decline in the demand for goods and services it produces
56
what are the economic costs of unemployment
lost wages and production decreased taxes and increased transfers
57
what are the psychological costs of unemployment
individual self esteem family stress of decreased income and increased uncertainty
58
what are the social costs of unemployment
potential increases in crimes and social problems
59
what is an unemployment spell
the period during which an individual is continuously unemployed
60
what is duration of unemployment
the length of an unemployment spell
61
what is long term unemployment
being out of work for 6 months +
62
what are the outcomes of short term unemployment
finding a permanent job after searching for a few weeks leave the labour force get a short term job that leads to unemployment again - chronically unemployment which has similar economic costs to long term unemployment
63
what are discouraged workers
would like to have a job but they have not looked for work for 4 weeks+ as they believe there is no work available
64
what are involuntary part time workers
people who like to work full-time but cannot find a full-time job
65
what is capitalism
characterised by private ownership of productive assets
66
what is laissez-faire capitalism
great reliance on exchange as a mode of coordination
67
what is administrative capitalism
substantial reliance on public administration as a mode of coordination
68
what is socialism
system that relies more on public ownership
69
what is administrative socialism
state ownership predominates and activity is coordinated primarily by public adminstration
70
what is market socialism
state ownership predominates but economic activity is coordinated through markets
71
what is the welfare state
a form of economic and social organisation a system in which the state plays a role for the protection and welfare of its citizens combination of collectivism, capitalism, social welfare policy and democracy
72
what are policy debates
right argue that free markets are most efficient way to achieve economic prosperity left argue that gov intervention to boost aggregate demand is necessary to bring economy towards full employment
73
what is neoliberalism
distinguished from liberalism concerned with economic freedom individual is solely responsible for the consequences of their own state involvement leads to totalitarianism individuals are rational and know their own needs better than the state
74
what is the neoliberal agenda
supremacy of the individual and commercial interests over that of society includes free trade, privatisation, shrinking of the state, large tax cuts and balanced budgets
75
what are the benefits of neoliberalism
economic efficiency - reduce role of govs, markets weed out inefficient companies and allowing those that produce goods at a reasonable price to succeed cheaper goods - free markets and free trade between nations, increases levels of competition and puts pressure on firms to reduce price and increase efficiency lower taxes - reduce influence and role of government, reduces the need for high levels of taxes higher levels of investment - incentives for businesses to improve efficiency
76
what are the costs of neoliberalism
deregulation, shrinking trade unions, privatisation and smaller states - linked to rising inequality income stagnation in bottom half of distribution inequality undermines democracy neoliberal model also intensifies climate change, legislation seen as an attack on individual freedom

ECON 102 (26 decks)

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