eco test2

  1. who is counted in adult population?
    people 16 years or older that are able to work (not institutionalized like in jail or nursing home)
  2. who is included in the labour force?
    the adult population that is looking for a job or has a job (employed and unemployed)
  3. how do you find the unemployment rate?
    divide the number of unemployed by the labour force (employed + unemployed) and multiply by 100
  4. how do you find labour force participation rate?
    divide labour force by the adult population and multiply by 100
  5. who are marginally attached workers?
    people that want a job but aren't looking
  6. who are underemployed?
    people that work part-time but want a full time job
  7. can the unemployment rate ever be zero?
    no! the economy is always changing
  8. what is cyclical unemployment?
    when the rate of unemployment raises higher than the natural rate of unemployment
  9. what is frictional unemployment?
    the natural process of matching works with jobs...usually short term and can happen when a person changes location
  10. 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
  11. what is the price index?
    measures the current cost relative to the base yea
  12. what is inflation?
    the percentage change in the price index
  13. 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
  14. what is core inflation?
    inflation rate without food or energy
  15. what is headline inflation?
    inflation rate of CPI
  16. what does CPI focus on?
    the change in prices not the change in quantity
  17. What is a nominal value/income?
    an amount of money in current year dollars
  18. What are real variables/income?
    an amount of money that has taken into account inflation (constant dollars)
  19. 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
  20. 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
  21. what is a cost of living adjustment?
    when your salary rises by the same percentage the inflation rises
  22. what is the consumer price index?
    the change in the cost of a fixed basket of goods/services purchased by the average urban consumer
  23. what is the GDP deflator?
    the change in the prices of goods/services produced in a given year
  24. what is nominal interest rate?
    the interest rate on a loan or that the bank puts on savings
  25. what is real interest rate?
    the nominal interest rate minus inflation
  26. what does it mean to have sustained economic growth?
    a country's capacity to produce goods and services has increased year after year
  27. how do you measure standard of living?
    use real GDP per capita
  28. how do you calculate rGDP per capita?
    subtract the nGPD from the inflation rate from the population growth rate
  29. how do you find any growth rate?
    subtract current year from base year and divide by base year and then multiply by 100
  30. what are factors of production?
    • the inputs needed to produce more outputs
    • ie. labor and capital
  31. what is capital?
    durable, produced goods that will be used to produce to produce other goods and will last longer than one year
  32. what are diminishing returns?
    when you increase factors of production but your production decreases
  33. what is GDP?
    the market value of final goods and services produced within the borders for a certain given time
  34. what are the four categories of expedinture
    consumption spending, investment spending, government spending, and export spending
  35. 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
  36. what are three types of investments?
    • nonresidential investment
    • residential investment
    • inventory investment
  37. what are the four categories of income?
    • wages
    • interest
    • rental
    • profit
  38. what is value-added?
    the value of output produced minus the value of material inputs
  39. what does it mean if nominal GDP is higher than real GDP?
    prices are rising
  40. what does GDP not measure?
    • infant mortality rates,
    • crime rates,
    • pollution,
    • illegal activities,
    • home production,
    • unreported activities,
    • leisure hours,
    • life expectancy 
    • literacy rates
  41. what's a good rate for inflation to be?
  42. what does it mean when GDP falls?
    level of production is growing slower
  43. if a countries income falls, what else would fall with it?
    gdp and expenditure
  44. what is the gdp deflator used to calculate?
    inflation rate
  45. nominal interest rate - inflation
  46. what happens when interest rate falls?
    people tend to borrow more causing the quantity demanded of loanable funds to increase
  47. national savings equals investment spending in a _____ economy
  48. what is a closed economy?
    an economy that doesn't trade with other countries
Card Set
eco test2