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Terms in this set (24)
the study of individual behavior - consumers/households, firms -and how they interact in markets for specific goods and services
e.g. Should a firm hire more workers and expand output? What price should McDonald's charge for their burger?
the study of the operation of the economy as a whole (the aggregate).
E.g. How does money supply affect inflation and output? used to explain economic events, and devise policies to improve economic performance. Consists of various parts that move together: Production of goods and services: firm behavior Demand for goods and services: individual or household behavior The markets which connect various actors. Government policies: monetary, fiscal, and exchange rate policies.
Gross Domestic Product
Level of production. the market value (in $) of all final economic activity (Consumers/households- Firms- Governments) in a certain country, in a given period of time.
Changes in overall price levels
measures how many people are earning a living
Firms' profit, households' wages, and households'
capital rental (explain)
What counts as income?
- Households Consume (C)- Firms Invest (I)- Governments consume and invest (G)
What counts as spending/expenditure?
consumption goods (durables, non durables,
investment goods (increases in capital -
machinery, plants, industrial equipment)
government spending (goods and services, but
not welfare spending or transfer payments)
net exports = exports - imports
output=consumption+investment+government spending+net exports
Y = C + I + G + NX (Open Economy)
Total market value of final goods and services in a country's geographical borders, in a particular year, valued at current year prices. (the value of output measured in current prices)
same as above, but ....valued at constant year prices. Suppose 2011 is the "constant" year (inflation-adjusted value of gdp. the value of output measured at constant prices.)
percent change = [(new value-old value)/old value]x100%
= [(Real GDP 2013-Real GDP 2012)/Real GDP 2012] x 100%
Economic growth (from 2012 to 2013)= :
the annual percentage change in
OVERALL price levels from the previous year.
5% inflation rate prices (increased or decreased?)
-2% inflation rate prices (increased or decreased?)
[(new prices-old prices)/old prices]x100%
inflation rate =?
Consumer Price Index
costs for typical consumers, is further divided into sub- categories such as: core CPI, food CPI, CPI without food. (a weighted average of the prices of all the goods and services that a typical consumer buys.)
first calculate the price index (CPI) for each year, then plug the CPI numbers into the inflation rate formula
how do you calculate inflation rates?
=(market basket in current year/market basket in base year) x100
A selected group of consumer goods and services whose prices are tracked for calculating a consumer price index and measuring the cost of living.Oct 1, 2015
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