BEC 5 - Econ Measures

  1. What is the formula for the expenditure approach to determining the GDP?
    • G-I-C-E
    • + Goverment spending
    • + Investment
    • + Consumption
    • + Exports (net)
  2. What is the formula for determining the unemployment rate
    • (Number of unemployed / total labor force) * 100,
    • where total labor force includes the employed+unemployed
  3. What is frictional unemployment?
    The time spent between jobs looking for a new job.
  4. What is structural unemployment?
    People who can't find a job either because they do not have the skills, or do not live where the jobs are located.
  5. What is cyclical unemployment? When is this (+) vs (-)?
    Changes due to expansion or contraction of the economy (chg in real GDP). It's (+) when employment is below full employment, and (-) when above full employment.
  6. What is full employment? What isn't full employment?
    • Full employment is when there is no cyclical unemployment and the economy is operating on the production possibility curve.
    • It doesn't mean there's no unemployment b/c some people still quit voluntarily to find another job, or structural unemployment exists.
  7. What is the formula for calculating CPI?
    (Current cost of market basket / base yr cost of the same market basket) * 100
  8. What is the formula for the inflation rate?
    (CPI this period-CPI last period / CPI of the last period) * 100
  9. What are the 3 methods used by the government to expand monetary policy and what is the effect?
    • Effect: increases AD, increases GDP, increases prices (some inflation), decreases unemployment
    • * Using open market operations to repurchase treasury bonds
    • * decrease the discount rate to decrease the overall interest rate
    • * decrease the required reserve ratio
  10. What are the 3 methods used by the government to contract monetary policy and what is the effect?
    • Effect: reduce AD, GDP decreases, decrease prices (reduce inflation), increase unemployment
    • * use open market operations to sell treasury bonds
    • * increase the discount rate
    • * increase the reserve ratio
  11. Which will likely cause a increase in the amount of frictional unemployment and why? (1) an increase in the avg age of the workforce, or (2) a decrease in the avg age of the workforce
    (2) a decrease as younger people tend to change jobs more frequently
  12. A lender borrowed money at 3% interest for 1 yr and paid $1,030 at the end of the year. There was 2% inflation. What is the amount worth in real terms?
    • $1009.80
    • $1,030 / 1.02
Card Set
BEC 5 - Econ Measures
Becker Review