Notes on GDP, inflation, and some other things
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| 348470990 | Equation for GDP | GDP= Consumption+Investment+Government Spending+Net Exports | |
| 348470991 | Components of Aggregate Demand | Consumption, Investment (Gross Private Domestic Business Investment), Government Spending, Net Exports, Savings, Taxes, Money Stock, Velocity | |
| 348470992 | What variables influence Consumption? | Relative prices of products and services, people's tastes, expectations of the future, change in interest rates, change in income | |
| 348470993 | What variables influence Investment(of producers)? | Number of consumers, people's tastes, expectations of future profit, change in inventories( high inventories, decrease in investment), change in interest rates, change in income | |
| 348470994 | What variables influence Government Spending (Keynesian Economics)? | Politicians; business cycle is down, spending increases | |
| 348470995 | What variables influence Net Exports? | Relative quality of foreign goods and services, relative prices of foreign goods and services, international value of the dollar (exchange rates), interest rates | |
| 348470996 | What variables influence Savings (of consumers)? | Relative prices of products and services, people's tastes, expectations of the future, change in interest rates, change in income; Savings increases, Aggregate Demand increases | |
| 348470997 | What variables influence Taxes? | Politicians | |
| 348470998 | What variables influence Money Stock? | Banks (influenced by Federal Reserve) | |
| 348470999 | Aggregate Demand | Amount of goods and services that will be purchased at all possible levels; Price decreases, Aggregate Demand increases as consumers' purchasing power increases | |
| 348471000 | Aggregate Supply | Total amount of goods and services in economy available at all possible price levels; add up all individual supply curves; Price increases, Aggregate Supply increases, Real GDP increases | |
| 348471001 | What four categories does the Expenditure Approach total? | Consumer goods and services, Business goods and services, Government goods and services, Net Exports or Imports of goods and services | |
| 348471002 | The Expenditure Approach | Totals annual expenditures in four categories of final goods and services; more practical, easier to do, used most often | |
| 348471003 | COLA | Cost Of Living Adjustment; Social Security | |
| 348471004 | Gross Domestic Product (GDP) | Country's income; dollar value of all final goods and services produced within country's borders in a given year; sold or made in the USA | |
| 348471005 | Gross National Product (GNP) | Citizen issue; dollar value of all final goods and services produced by Americans; made by Americans (does not have to be within the country) | |
| 348471006 | Calculating GDP has what two approaches? | The Expenditure Approach and the Income Approach | |
| 348471007 | Income Approach | Calculates GDP by adding up all the incomes in the economy | |
| 348471008 | Name two types of consumer goods | Durable (last a long time; refrigerator) and nondurable (last a short time; food, light bulbs) goods | |
| 348471009 | Nominal GDP | Measured in current prices; does not account for price level increases from year to year; all other GDP | |
| 348471010 | Real GDP | Expressed in constant, or unchanging dollars (hold prices constant); pick a year and set as base year to compare changes in prices (use base year prices for all GDP calculations) | |
| 348471011 | T or F: For the base year, Nominal GDP equals Real GDP? | True | |
| 348471012 | GDP does not measure what? | Nonmarket activities, negative externalities, The Underground Economy, Quality of Life | |
| 348471013 | Non market activities | Goods and services that people make or do themselves (childcare, mowing the lawn, cooking dinner) | |
| 348471014 | Negative Externalities | Unintended economic side effects on uninvolved third party; always overproduced | |
| 348471015 | The Underground Economy | Black market | |
| 348471016 | Quality of Life | Leisure time, pleasant surroundings, personal safety/ security | |
| 348471017 | What factors influence GDP? | Aggregate Supply and Aggregate Demand | |
| 348471018 | Aggregate Supply/ Aggregate Demand Equilibrium | Combine Supply and Demand curves and the equilibrium can be determined (macroeconomics) | |
| 348471019 | Economic indicators | Tell where the economy is going | |
| 348471020 | Leading indicators | Predict new phase of business cycle; stock market performance, interest rates, new home sales, PPI, CPI | |
| 348471021 | Capital Deepening | Process of increasing amount of capital per worker; one of most important sources of growth in modern economy | |
| 348471022 | Name two ways that firms can deepen capital | Increase physical capital by purchasing more equipment; increase human capital through additional training and education | |
| 348471023 | Increased Savings leads to what? | Higher output and GDP | |
| 348471024 | Formula for Standard of Living | GDP/ Population | |
| 348471025 | What is an effect of rising prices? | Inflation (increase in prices); eats away at purchasing power; as you buy, demand moves right (increases) and inflation rates increase | |
| 348471026 | What is the optimal inflation rate? | 3 Percent | |
| 348471027 | Name two Price Indices | Producer Price Index (PPI), Consumer Price Index (CPI) | |
| 348471028 | Consumer Price Index (CPI) | Most popular measure; market basket of typical urban consumer; track how prices change by the month; measures inflation; PPI increase, CPI increases | |
| 348471029 | Producer Price Index (PPI) | Cost of production | |
| 348471030 | What are causes of inflation? | Too much money, Cost-push inflation, Demand-pull inflation | |
| 348471031 | Cost-Push Inflation | Producer takes increased cost of production and "pushes" it onto the consumer; wage-price spiral | |
| 348471032 | Wage-Price Spiral | As prices continue to rise, workers demand higher wages, which again increases the prices of products because wages are a cost of production | |
| 348471033 | Demand-Pull Inflation | Demand increases, prices increase | |
| 348471034 | T or F: A little inflation is good | True; it means that people are consuming and the economy is up, making money; Deflation is BAD, prices are down and there is no money | |
| 348471035 | Official Recession | GDP has declined over two consecutive quarters | |
| 348471036 | Types of Unemployment | Frictional (choice), Structural (missing skills), Seasonal (Six flags, fisherman), Cyclical (swings in the business cycle; only type measured by unemployment rate) | |
| 348471037 | Underemployed | Overqualified | |
| 348471038 | Discouraged workers | Not in the labor force (stopped looking); not included in unemployment rate | |
| 348471039 | Full employment | Unemployment rate of 4 to 6 percent, no cyclical unemployment; US needs 125,000 jobs a month to keep up with the population | |
| 348471040 | What is the downside of a strong currency? | Decreased exports and increased imports (get more for your dollar from foreign producers and foreign markets get less for their dollar from US market) | |
| 348471041 | Velocity | How quickly money flows through economy | |
| 348471042 | EOCT: What is CPI/ Inflation rate? | *pick the number closest to 100 | |
| 348471043 | When calculating GDP, hold what constant? | Prices; use the base year | |
| 348471044 | Formula for GDP deflator | (Nominal GDP/ Real GDP) * 100 | |
| 348471045 | How is Net National Product (NNP) calculated? | GNP - depreciation | |
| 348471046 | How is Personal Income (PI) calculated? | National Income (NI) - (firm reinvested money, firm income taxes, social security) + other household income | |
| 348471047 | How is Disposable Personal Income (DPI) calculated? | PI - individual income taxes | |
| 348471048 | How is National Income (NI) calculated? | NNP - sales and excise taxes | |
| 348471049 | Determining the Unemployment rate | (Labor force - employed)/ Labor force | |
| 348471050 | Real Interest Rate | Nominal Interest Rate - Inflation | |
| 348471051 | Figuring out CPI | Fix the basket (what is in it?), find prices of basket items, calculate value of basket (P x Q), CPI for base year is 100, (value of current year basket/ value of base basket) *100; hold quantities constant (use base year) | |
| 348471052 | Formula for Inflation Method 1 | [(GDP deflator - GDP deflator prev)/ GDP deflator prev] *100 | |
| 348471053 | Formula for measuring Inflation | [(CPI current - CPI prev)/ CPI prev] * 100 | |
| 348471054 | Velocity of Money formula | V = (P*Y)/ M |
