Economics

Chapter 11: Interpreting Real Gross Domestic Product ? -The difference between real GDP and nominal GDP -Why real GDP is the appropriate measure of real economic activity ? GDP: a measure of the size of the economy represents increase in prizes of goods and services rather than an increase in output provides a good way to compare the size of different economies but not a good measure of the economy?s growth over time can grow to economic expansion or just inflation Real GDP: measures actual changes in aggregate output/ adjusted for price changes total value of all final goods and services produced during a given year calculated using the prices of a selected base year (assumed prices stay constant)

Chapter 14: Inflation: An Overview ? -The economic costs of inflation -How inflation creates winners and losers -Why policy makers try to maintain a stable rate of inflation -The difference between real and nominal values of income, wages, and interest rates -The problems of deflation and disinflation ? Inflation: Most common complaint: an increase in the price level makes everyone poorer- does not make everyone poorer Real Wage: the wage rate divided by the price level Real income: income divided by the price level Inflation Rate: the percent change per year in a price index?typically the consumer price index the percent increase in the overall level of prices per year ? ? The level of prices doesn?t matter Reducing prices = Reducing income

Chapter 12: The Meaning and Calculation of Unemployment ? -How unemployment is measured -How the unemployment rate is calculated -The significance of the unemployment rate for the economy -The relationship between the unemployment rate and economic growth ? Employed: people who currently hold a job in the economy, either full time or part time/ only if you have a job Unemployed: people who are actively looking for work but aren?t currently employed Limitations: Retired people Disabled Hasn?t actively searched for a Job in the last 4 weeks Discouraged workers Marginally attached workers Underemployed U.S. Census Bureau monthly survey called the Current Population Survey: interviewing a random sample of 60,000 American families

?? Chapter 10: The Circular Flow and Gross Domestic Product ? National income and product accounts/National accounts: keep track of the flows of money between different sectors of the economy/ keep track of the spending of consumers, sales of producers, business investment spending, government purchases, and a variety of other flows of money among different sectors of the economy The Simple Circular Flow Diagram: Simple economic diagram with households and firms, omits a number of real-world complications in the interest of simplicity Household: consists of either an individual or a group of people who share their income Firm: is an organization that produces goods and services for sale and employs members of households

?? Chapter 7: Supply and Demand: Changes in Equilibrium ? substitutes: if the price of good1 rises, the demand for good2 will increase if the price of good1 falls, the demand for good2 will decrease An increase in demand leads to a rise in both the equilibrium price and the equilibrium quantity. A decrease in demand leads to a fall in both the equilibrium price and the equilibrium quantity. Increase in demand: rightward shift of the demand curve market is no longer in equilibrium shortage: quantity demanded exceeds quantity supplied price rises increase in the quantity supplied upward movement along the supply curve new equilibrium When demand for a good or service increases, the equilibrium price and the equilibrium quantity of the