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who is counted in adult population?
people 16 years or older that are able to work (not institutionalized like in jail or nursing home)
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who is included in the labour force?
the adult population that is looking for a job or has a job (employed and unemployed)
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how do you find the unemployment rate?
divide the number of unemployed by the labour force (employed + unemployed) and multiply by 100
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how do you find labour force participation rate?
divide labour force by the adult population and multiply by 100
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who are marginally attached workers?
people that want a job but aren't looking
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who are underemployed?
people that work part-time but want a full time job
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can the unemployment rate ever be zero?
no! the economy is always changing
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what is cyclical unemployment?
when the rate of unemployment raises higher than the natural rate of unemployment
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what is frictional unemployment?
the natural process of matching works with jobs...usually short term and can happen when a person changes location
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how do you calculate the CPI?
divide the cost of basket in current year by cost of basket in base year and multiply by 100
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what is the price index?
measures the current cost relative to the base yea
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what is inflation?
the percentage change in the price index
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how do you calculate the inflation rate?
subtract your current year and your base year and divide the difference by the base year and then multiply by 100
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what is core inflation?
inflation rate without food or energy
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what is headline inflation?
inflation rate of CPI
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what does CPI focus on?
the change in prices not the change in quantity
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What is a nominal value/income?
an amount of money in current year dollars
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What are real variables/income?
an amount of money that has taken into account inflation (constant dollars)
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Can you directly compare nominal variables from year to year?
no! what you made in 1960 won't let you buy as many things now because of inflation
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how do you calculate real variables?
divide the CPI of current year by the CPI of the older year and multiply by the nominal value of the year that you're not calculating for
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what is a cost of living adjustment?
when your salary rises by the same percentage the inflation rises
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what is the consumer price index?
the change in the cost of a fixed basket of goods/services purchased by the average urban consumer
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what is the GDP deflator?
the change in the prices of goods/services produced in a given year
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what is nominal interest rate?
the interest rate on a loan or that the bank puts on savings
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what is real interest rate?
the nominal interest rate minus inflation
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what does it mean to have sustained economic growth?
a country's capacity to produce goods and services has increased year after year
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how do you measure standard of living?
use real GDP per capita
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how do you calculate rGDP per capita?
subtract the nGPD from the inflation rate from the population growth rate
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how do you find any growth rate?
subtract current year from base year and divide by base year and then multiply by 100
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what are factors of production?
- the inputs needed to produce more outputs
- ie. labor and capital
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what is capital?
durable, produced goods that will be used to produce to produce other goods and will last longer than one year
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what are diminishing returns?
when you increase factors of production but your production decreases
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what is GDP?
the market value of final goods and services produced within the borders for a certain given time
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what are the four categories of expedinture
consumption spending, investment spending, government spending, and export spending
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what are the four categories of buys and what are their expenditures?
- consumer - consumption spending
- firms - investment spending
- state, local, and federal government - government spending
- the rest of the world - export spending
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what are three types of investments?
- nonresidential investment
- residential investment
- inventory investment
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what are the four categories of income?
- wages
- interest
- rental
- profit
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what is value-added?
the value of output produced minus the value of material inputs
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what does it mean if nominal GDP is higher than real GDP?
prices are rising
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what does GDP not measure?
- infant mortality rates,
- crime rates,
- pollution,
- illegal activities,
- home production,
- unreported activities,
- leisure hours,
- life expectancy
- literacy rates
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what's a good rate for inflation to be?
2%
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what does it mean when GDP falls?
level of production is growing slower
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if a countries income falls, what else would fall with it?
gdp and expenditure
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what is the gdp deflator used to calculate?
inflation rate
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nominal interest rate - inflation
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what happens when interest rate falls?
people tend to borrow more causing the quantity demanded of loanable funds to increase
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national savings equals investment spending in a _____ economy
closed
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what is a closed economy?
an economy that doesn't trade with other countries
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