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Terms in this set (95)
GDP (Gross Domestic Product) What is included
All items and services manufactured in the boarders of a country
GDP (Gross Domestic Product) the equation
C (consumption) + I (business investment) + G (government spending) + Xn (net exports=exports-imports)
GDP (Gross Domestic Product) what is measures
the overall health of the economy, positive GDP growth means economic growth
GDP (Gross Domestic Product) limitations
does not account for goods sold on the black market, garage sales, second hand car sales
What is double counting?
Counting item twice for GDP (economics only count the final good like a pizza, not all the individual ingredients)
Durable vs. Nondurable?
Durable are goods that last a long time, more than five years (appliances), non-durable goods are goods that don't last long (food, clothes)
Real vs. Nominal GDP?
Real GDP is GDP prices fixed to a base year and used to make year to year comparisons, Nominal GDP is GDP in current year prices.
Consumer Price Index:
is a market basket of prices for commonly used items
GNP (What does it include)?
Gross National Product take into account all items produced by individuals of a country no matter where the item is physically produced
a graph that measures economic performance. macroeconomics period of expansion followed by a period of contraction
growth in GDP. measured by a rise in real GDP economic growth is a steady long-term rise in real GDP
a decline in GDP. following the peak, economy enters a period of contraction, an economic declining marked by a fall in real GDP
Top of the growth in GDP. when real GDP stops rising. the economy has reached its peak the height of its economic expansion
bottom of the decline in GDP. lowest point of economic decline, when real GDP stops falling
4 types of unemployment:a. Frictional-
Unemployment that occurs when people take time to find a job (1st time job seekers after college).
4 types of unemployment:b. Seasonal-
unemployment that occurs as a result of harvest schedules or vacations (life guard).
4 types of unemployment:d. Cyclical-
unemployment that rises during economic downturns and falls when the economic improves. during a recession or depression
4 types of unemployment:c. Structural-
Unemployment that occurs when worker's skills do not match the jobs that are available. development of new technology, discovery of new resources, changes in consumer demand, globalization, lack of education.
a prolong contraction in the business cycle
a longer and more server recession
high unemployment and high inflation (1970's OPEC embargo on US)
prices rising (okay is controlled to 1%-3% per year)
prices lowering (not good, usually a signal that there is an economic downturn)
quickly rising and uncontrolled rising of prices.
. Causes of the Great Depression:
a. People where buying goods on credit and going into debt
b. Over supply of goods to buy
c. People thinking the stock market would continue to increase and made bad and risky investments
. Causes of the Great Recession:
a. People where buying goods on credit and going into debt
b. People bought houses that could not afford
c. Over supply of goods to buy
d. People thinking the value of their house would increase
e. People thinking the value to the stock market would increase, making bad investments
major player in the great recession of 2007: henry Paulson-
secretary of the treasury
major player in the great recession of 2007: ben Bernanke-
chairman of the federal reserve
major player in the great recession of 2007: Tim Geithner-
chair of federal reserve of new York
major player in the great recession of 2007: Freddie mac-
affects the overall market
what are capital injections?
inflow of cash, stock or even debt into a company
risk that a party to a truncation has not entered into contraction in good faith, has providing misleading
what happened to Lehmann brothers?
sept 15, 2008, Lehman brothers feud for bankruptcy largest filing bankruptcy in history
what happened to Freddie Fannie?
nationalized bailed out by government both mortgage companies
what happen to AIG?
major movement. $1 trillion assets. on sept 16, the federal reserve bank of NY stepped in with a $85 billion loan to keep falling company from going under.
mortgage with a high interest rate
wall street banks-
rack aging= putting mortgages together sold them like stocks/investments
expenditures exceed revenue
revenues exceed expenditures
firms produce goods and services using inputs called.....
factors of production
households own the factors of production and consume all the goods and services that the firms _______________
market for goods and services; households are the buyers and firms are the sellers
households are sellers, and the firms are buyers
(inner loop) households sell the use of their _________________, ___________________ , _____________ to the firms in the markets for the factor of production. the firms than use these factors of production to produce goods and services
land, labor, capital
household spend money to buy goods and services from the firms. the firms use some of the revenue from these sales to pay for the factors of production, such as the wages of their workers. what's left is profit of the firms owners, who themselves are members of a household.
outer loop (monetary)
OPEC is a cartel-
which is a group of sellers that attempts to thwart competition and reduce production in order to raise prices
crash of 1929-
September 3rd. dow jones reached a peak and then stock prices began to fall. prices fell so much the investors raced to get what was left of their money out of the tock market
(FDIC) federal deposit insurance corporation.
congress passed the banking act of 1933 which created it. FDIC to insure deposits. this meant that even in a bank failed, deposits would be guaranteed by the federal government
the great depression substantially increased the role of the federal government in the economy?
zero unemployment is not an achievable goal in a market economy. the level of employment reached when there is no cyclical unemployment
GDP is the market value-
the value or how much every good in the market cost all together
GDP of all..-
this includes all items produced in the economy and sold legally in markets
all inputs by itself are not part of GDP. GDP includes the value of final goods
GDP goods and services...-
includes books, clothes, cars, food, and includes services like haircuts housecleaning, doctor visits
this only includes goods and services currently produced.
GDP within a country...-
when anybody wether American or not produces a good or service in the united states the value of that good or service is included in the GDP of the United states. but when an American produces a good or service in another country, then it is not counted as a part of GDP
GDP in a given period of time...-
usually the interval of time of which GDP is measured is either a year or a quarter year
goods that last for a relatively long time... cars, refrigerator
goods that last a short period of time... food, clothing
GDP (or Y) = consumption (C) + investment (I)+ government purchases (G) + net exports (XN)
business good and services.
includes spending on goods and services by local , state, and federal governments
equal the purchase of domestically produced goods by foreigners minus the domestic purchases of foreign goods
gross national product
the annual income earned by U.S. owned firms and U.S. citizens
GNP is measured by ....
market value of all goods and services produced by Americans in one year
several other measurements of the economy are
net national product, national income, personal income, disposable income
the more economist know about the nations economic health the better the chance of....
the production of goods and services valued at a constant price.
the production of goods and services valued at current price
consumer price index
computed each month by bureau of labor statistics. determined by measuring the price of a standard group of goods meant to represent the "market basket" of typical urban consumers
3 causes of inflation
quantity theory, demand-pull theory, cost-push theory
too much money in the economy
more demand than supply and producers raise prices to lower the demand
producers raise prices in order to meet increased costs of inputs
this is the amount of goods and services in the economy that will be purchased at all possible price levels
revenues are equal to spending. there is the same amount of money going into the us treasury as coming out. taxes= government spending
a shortfall of tax revenue from government spending. the government is spending more money then it is receiving from taxes. taxes < government spending
when government runs a deficit two things can do-
create money, borrow money
the income, property, good, or services that is subject to a tax.
a tax for which the percentage of income paid in taxes remains the same for all levels of income
a tax for which the percentage of income paid in taxes increases as income increases
a smaller percentage of income is taken in taxes as income increases
A situation in which the government takes in more than it spends
A situation in which the government spends more than it takes in
A government bond that is repaid within three months to a year
A government bond that is repaid within two to ten years
A government bond that is repaid within two to ten years
The loss of funds for private investment due to government borrowing
A plan for the federal governments revenues and spending for the coming year
Budget in which revenues are equal to spending
A twelve month period that can begin on any date
The use of government spending and revenue collection to influence the economy
when economic conditions deteriorate, much of the decline is attributable to
economic systems can be classified by:
Inflation exists when there is an increase over time in the average....
assume that the required reserves ratio is 15%. if the fed buys $50,000 worth of bonds what happens to the money supply?
Recommended textbook explanations
Krugman's Economics for AP*
David Anderson, Margaret Ray
Principles of Economics
N. Gregory Mankiw
Gary E. Clayton
Essentials of Investments
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