Terms in this set (34)
Promote growth, limit unemployment, limit inflation.
3 Economic Goals
the dollar value of all final goods and services produced within a country's borders in one year.
Dollar value, final goods, one year.
Parts of GDP
_________ is the best measure of economic growth.
Intermediate Goods, Nonproduction Transactions, Non-Market Activities.
Things that are not included in GDP.
Measured in current prices. It does not account for inflation from year to year.
Expressed in constant, or unchanging, dollars. Adjusts for inflation.
Real GDP per capita
The best measure of a nation's standard of living.
An increase in real GDP over time and an increase in real GDP per capita over time (usually used to determine standard of living)
Provides better goods and services, Increases wages and standard of living, Economy can better meet wants, and Allows more leisure time.
Why is economic growth the goal of every society?
The percent of people in the labor force who want a job, but are not working.
Above 16, willing and able to work, no jails or hospitals, not in the military
Who is in the labor force?
"Temporarily unemployed" or being between jobs.
Specific typeof frictional unemployment which is due to the time of year and the nature of the job.
Workers do not have transferable skills and these jobs will never come back. EX: VCR Repairmen
Type of structural unemployment where automation and machinery replace workers causing unemployment.
Natural Rate of Unemployment
The normal rate of unemployment that we should have.
Structural and Frictional
Two types of unemployment that make up the NRU.
When unemployment rises about 1 percent above the natural rate, GDP falls by about 2 percent.
The % change in prices in one year.
Lenders, people with fixed income, savers
Who is hurt by inflation?
Borrowers, Price of the product increases faster than the price of the resource.
Who is helped by inflation?
The most commonly used measurement of inflation for consumers.
Substitution Bias, New Products, Product Quality
Problems with CPI
As prices increase for the fixed market basket, consumers buy less of these products and more substitutes that may not be part of the market basket.
The CPI market basket may not include the newest consumer products.
The CPI ignores both improvements and decline.
Measures the prices of all goods produced, whereas the CPI measures prices of only the goods and services bought by consumers.
Government prints too much money, Demand- Pull Inflation, Cost-Push Inflation
3 Causes of Inflation
"Too many dollars chasing too few goods"
__________ pulls prices up.
Higher production costs increase prices.
Real Interest Rate
The percentage increase in purchasing power that a borrower pays.
Nominal Interest Rate
The percentage increase in money that the borrower pays not adjusting for inflation.
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