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Econ. Test 1
Review for test one
Terms in this set (29)
The market value of all officially recognized final goods and services produced within a country in a given period of time.
National income identity
Consumption, Investment, Govt. Expenditures, Exports, Imports, Y is income
rent and interest
Convert nominal to real/real to nominal
Real = nominal / index X 100
monthly, sample of products
quarterly, a better measure of inflation
is a basket that includes all products, goods, and services
Why is GDP not perfect?
Labor force is divided into two groups:
employed and unemployed
unemployed / labor force
expenditures in current year / expenditures base X 100
CPI base is always 100
Types of unemployment
Frictional: we go into recession
Structural: losing a job to foreign countries or robots
Cyclical: business cycle
most recent year - CPI in initial year / initial year X 100
Rule of 70
a way to estimate the number of years it takes for a certain variable to double
capital and labor are the two most used resources
Drivers of productivity
technology, and capital level (human or physical)
Human: knowledge humans have
If you add workers...
it will go up at a decreasing rate.
Line shifts up by making people more productive. (more output per worker).
Supply and demand
Demand increase, supply unchanged= higher price.
Demand decrease, supply unchanged= lower price.
Demand unchanged, supply increase= lower price
Demand unchanged, supply decrease= higher price.
nominal rates = real rates - expected inflation
Who is in the labor force?
People of age, military
Who is not in the labor force?
students, retired people, stay at home parents, prisoners, discouraged workers
Two ways GDP increases
price increase and more production
What determines growth?
technology, machinery, human capital, and production
Two ways to increase standard of living
increase in technology
increase in human capital
Rule of law
Why are other countries not where the U.S. is at?
-failure to enforce rule of law
-war and revolutions
-poor education and health
-low rate of saving and investment
small loans made to only females
a rise in the general level of prices of goods and services in the economy over a period of time
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