84 terms


a measure of a countrys production is its
gross domestic product
GDP is measured by
adding the market value of total final production
GDP equals the value of all
final goods and services produced
If you make dinner for yourself
none of what you bought to prepare for dinner is included in GDP
Honda has an assembly plant for civics in Ohio. The production of US made Civics is
added to US GDP only if the civic is sold in the US in the year it is produced
Which of the following is a final good or service
the new economics textbook you are using
Investment is defined as the purchase of
the purchase of new capital goods and additions to inventories
Gross Domestic Product Equals
In order to measure gross domestic product we can follow
two approaches: the expenditure approach and the income approach
When calculating GDP, purchases of used goods are
not included
Real GDP measures the value of goods and services produced in a given year valued using
base year prices
Real GDP is all final goods and services produced in a year within a country valued at
market prices prevailing in the current year
Nominal GDP measures the value of goods and services produced in agiven year valued using
prices of the same year
If we use GDP to measure our standard of living, then our procedure is
inaccurate because our standard of living does not depend only on goods and services
a reason real GDP does not accurately measure the change in our standard of living is because real GDP
Includes only changes in quantity and not changes in price
Household production, such as baking bread at home, is not included in GDP because
does not involve a market transaction
Leisure time is ignored when calculating GDP because
does not involve a measurable market transaction
The CPI stands for
Consumer Price Index
The consumer price index measures the average prices paid by
urban consumers for a fixed market basket of goods and services
The CPI is calculated by the Bureau of Labor Statistics on a frequency of every
To measure the CPI, the BLS economic assistants check the prices of
80,000 goods and services every month
The reference base period that the BLS uses to measure CPI is
The Items included in the CPI are
goods and services consumed by the typical urban household
The CPI market basket is determined by
consumer survey
The largest component in the CPI market basket is
Economists agree that the CPI
is a possibly biased measure of the cost of living
The CPI is biased because it
does not always take into account the changes in product quality
The presence of new goods that are of higher quality than the old goods leads the BLS to
Try to seperate price differences from improvements in quality
The fact that consumers substitute one good for another when prices change is
...not taken into account y the fixed market basket used in calculating cpi
The GDP deflator measures
the price level
Real GDP is 1,500 billion and nominal GDP is 1,650. The GDP deflator equals
the difference between nominal and real is
nominal is measured in current dollars and real is measured in dollars of a given year
Nominal and real wage rates
could change in opposite directions
If there is inflation and we compare the changes in nominal variable over time versus its real counterpart, such as the nominal wage rate vs the real wage rate, we find that the
nominal wage rate increases faster because of inflation
A change in the real wage rate measures the change in the
quantity of goods and services that an hours work can buy
if the real wage rate increases over time, this means that the
The CPI must have decreased over time
to convert the nominal interest rate to the real interest rate, we
subtract the inflation rate from the nominal interest rate
The real interest rate is negative if the inflation rate
exceeds the nominal interest rate
The Bureau of Labor Statistics complies information about employment by
performing a monthly survey of 60,000 households
the working age population includes
employed and unemployed people over the age of 16
if a 19 year old college student can not find a full tie job and has to take a part time job, he or she will be catergorized in the current population survey as
in order to be considered employed, in the week before the current population survey a person must
worked at least one hour as a paid employee
the size of the labor force is
equal to the working age population
the unemployment rate is equal to 100 times
(number of unemployed people/ labor force)
Suppose the population is 220 million and the labor force is 150 million, teh number of people employed is 130 mil and the working age population is 175 mil, what is the unemployment rate?
13.3 percent
The labor force participation rate is the
labor force divided by the working age population, then multiplied by 100
a discouraged worker is
a worker who does not have a job and has not made any efforts to find a job within the previous four weeks
discouraged workers are calculated in the
working age population only
the total number of hours worked by the labor force is measured by
aggregate hours
the average US unemployment rate during the past 40 years has been about
5.9 percent
In which of the following periods did the unemployment rate reach its highest level
during a recession, the unemployment rate
usually increases but not necessarily to 10 or 25 percent
during an expansion, the unemployment rate generally
the highest unemployment rate ever in US history
10 percent in 1982
recent unemployment rates in
THe UK are much greater than US unemployment rates
in part, the increase in the labor force participation rate in the US over the last 40 years can be attributed to
technological change in the home increasing the time available for paid employment
Since 1967 the labor force participation rate in the US
has generally increased
The data show that during a recession
both aggregate hours of work and average hours per person decreases
job losers are people who
are laid off
people who are laid off from work are called
job losers
the biggest source of unemployment is
job losers
people who leave their jobs are called
job leavers if the left voulntarily
Entrants include people who
recently left school to look for a job
withdrawls are people who
ecide to stop looking for a job
frictional unemployment is the result of
the normal process of jobs being created and destroyed
structural unemployment includes people who become unemployed from
technological changes
amy was laid off from her construction job but amy is laid off every winter because of the snow. this is classified as
seasonal unemployment
cyclical unemployment is
created by recession
Full employment is the level of unemployment that occurs
when cyclical unemployment is zero
If the unemployment rate is less than the natural unemployment rate, then
real gdp is above potential gdp
Potential GDP is defined as
the level of real GDP at full employment
When the economy is at full employment
real GDP is equal to potential GDP
as the quantity of labor employed increases, the production functions exhibits a
positive relationship, with each additional unit of labor producing more additional real GDP
the idea of diminishing returns means that real GDP __________ as the quantity of labor increases
increases at a slower rate
The demand for labor curve is
downward sloping , showing that the quantity of labor demanded increases when the real wage falls
The supply of labor is defined as the relationship between the real wage rate and the
quantity of labor supplied by firms
economic growth is defined as
a sustained expansion of production possibilities
economic growth is defined as equal to the increase in
real gdp
in growth theory the standard of living is measured using the growth rate of
real GDP per person
real gdp grows when
labor productivity increases
labor productivity equals
real gdp per hour of labor
an important condition required for economic growth is
economic freedom
one of the possible roles governments can play in sponsoring growth is to
provide tax incentives to encourage saving
if consumption was 70 percent of GDP and both investment and government expenditure were 18 percent each, then we see that
we must subtract depreciation from investment so tat the components of GDP do not exceed 100 percent