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Terms in this set (11)
You add up C + I + G + X - M
C- Consumer spending
G- Government spending
Add up wages, rent, interest, profits, and taxes on production and imports
Discuss the nature and function of the GDP Deflator price index, and describe the difference between nominal GDP and real GDP.
calculated as Nominal GDP/Real GD
Nominal GDP is the market value of final goods and services while real GDP tells us what the market value would be if prices stayed at base year levels.
What is the gross private investment? Is the investment in the bond market part of the gross private investment? What is the difference between fixed/planned investment and unplanned investment?
It is purchases of plant and equipment (as well as new construction and R and D spending). It is NOT financial investment like buying bonds. Fixed/planned investment is intentional and unplanned investment refers to build up of inventories that occur when demand is low and output doesn't get sold (spending to make those goods that end up as inventories is classified as investment)
two ways that economic growth is measured.
Real GDP growth or growth of real GDP per capita
Discuss differing perspectives as to whether growth is desirable and sustainable
It raises the average standard of living but you also have to consider that some segments of the population might not benefit if there is too much inequality and that some growth causes pollution and bad health outcomes and that GDP ignores things like leisure time and underground economy activity
Illustrate how unemployment is measured. In your discussion define the labor force and what portion(s) of society are not included as part of the labor force?
You take the number of unemployed and divide by the labor force then multiply by 100 to get the %The unemployed are those in the labor force seeking workin) but not working. People excluded from the labor force are children, retirees, or folks choosing not to work, discouraged workers who give up looking
Explain the different types of unemployment (structural, frictional, cyclical) and the Natural Rate of Unemployment?
Look at index cards
Natural rate of unemployment- sum of structural and frictional
How is inflation measured?
Use the CPI index or GDP price index then get % change
Hurts lenders and savers, helps those in debt
What is real income and how is it calculated? What is real Interest and how is it calculated?
Real income is nominal/price index
Real interest rate = nominal rate - inflation rate
Describe how changes in income affect consumption (and saving).( MPC, MPS)
Rising income makes Consumption and Saving rise
MPC is the change in C/ change in income MPS is change in S /change in income
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