Ap Macroeconomics Unit 2 Test Test Questions – Flashcards
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A) Rate of Change [IR]
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Current Year-Base Year/Base Year [CPI,rGDP]
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B) Inflation Rate [IR]
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Rate of Change x 100 [CPI,rGDP]
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A) Rate of Change [PI]
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Current Year/Base Year
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B) Price Index [PI]
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Rate of Change x 100
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Real Wage
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Wage Rate/Price Level
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Real Income
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Income/Price Level
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A) Causes of Inflation-Demand Pull
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1) Increase in D for g/s 2) Over employment and wage inflation because of economic growth
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B) Causes of Inflation-Cost & Push
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1) Increase in natural disasters, political disasters 2) Decrease in S because increase in input costs
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C) Causes of Inflation-Political
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Government printing of money to cover debts
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Fixed Rates
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1) Payment form loan and savings 2) Doesn't change based on interest rate from inflation
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Adjusted Rates
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Payment could change based on interest rate from inflation
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A) Frictional Unemployment
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Between jobs
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B) Seasonal Unemployment
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Waiting for the right reason in which to work
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C) Cyclical Unemployment
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Victims of the business cycle
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D) Structural Unemployment
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Skills don't match available jobs
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Labor Force Participation Rate [LFPR]
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Labor Force/Population x 100
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Unemployment Rate [UR]
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Number of Unemployed/Labor Force x 100
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A) GDP 4 Components
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C+Ig+G+Xn
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B) Consumer Spending [C]
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Purchases of finished g/s excluding houses
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C) Gross Private Business Investment Spending [Ig]
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1) Factory equipment maitnance-unsold innovatory bolt within a year, but not sold that year 2) New equipment 3) Construction of housing
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D) Government Spending [G]
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Spending on purchases of g/s
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E) Exports-Imports [Ex]
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1) Exports-cash inflow (credits) 2) Inports-cash outflow (debts)
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Items NOT counted in GDP
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1) Intermediate g/s 2) Used Goods 3) Stocks & Bonds 4) Gifts & Transfers 5) Unreported Business Activity 6) Illegal Activity 7) Non-Market Activities
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Business Cycle Aggregates
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1) Price Levels 2) Outputs 3) Unemployment Rates 4) Current Economy
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Secular Trend [BC]
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Private assumption of long term growth
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Expansion [BC]
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Growth for 6 months minimum
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Peak [BC]
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Time expansion ends
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Contraction Recession [BC]
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Decline for 6 months minimum of rGDP
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Trough [BC]
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Time contractions end
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Six Months [BC]
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Minimum time GDP data is relevant
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Trough to Trough [BC]
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"Length" of a cycle
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Six Years [BC]
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Average length of cycle in the US from 1776-2011
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Fourteen Months [BC]
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Average length of recession in the US from 1900-2011
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Stagflation [BC]
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Both expansion & recession at the same time
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Misery Index [BC]
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Unemployment Rate and Inflation Rate together
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Recession-Chart [BC]
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Increase in unemployment rate and inflation
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Expansion-Chart [BC]
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Decrease in unemployment rate and deflation
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Aggregate Output
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Total quantity of final goods and services produced within and economy
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rGDP
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Total value of all final goods and services produced in the economy during a given year, calculated with base years
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Nominal GDP
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Total value of all final goods and services produced in the economy during a given year, calculated with the prices current in the year in which the output is produced
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Chain-Linking
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Method of calculating changes in real GDP using the average between the growth rate calculated using an early base year and the growth rate calculated using a late base year
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GDP Per Capita
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GDP/total population of a country
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Employed
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Currently holding a job in the economy, either full time or part time
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Unemployed
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Not working and looking for work
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Labor Force
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Employed+Unemployed
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Discouraged Workers
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Individuals who would like to work but have given up looking for a job
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Marginally Attached Workers
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A person who currently is neither working nor looking for work but has indicated that he or she wants and is available for a job
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Underemployed
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People who have part- time jobs but want full- time work or whose jobs are below their experience and education level
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Job Search
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Workers who spend time looking for employment
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Efficiency Wages
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Above-equilibrium wages paid by firms to increase worker productivity
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Natural Rate of Unemployment
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Frictional Unemployment + Structural Unemployment
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Shoe Leather Costs
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The increased costs of transactions caused by inflation
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Menu Costs
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The costs of changing prices
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Unit-of-Account Costs
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Arise from the way inflation makes money a less reliable unit of measurement
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Nominal Interest Rate
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Rate actually paid for a loan
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Real Interest Rate
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Nominal Interest Rate - Inflation Rate
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Disinflation
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A reduction in the rate of inflation
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Aggregate Price Level
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A measure of the overall level of prices in the economy
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Market Basket
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A representative collection of goods and services
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Price Index
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1) A measure of price of a specified collection of goods and services in a given year 2) Equal to 100 in base year
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Consumer Price Index [CPI]
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Measures the cost of the market basket of a typical urban American family
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Producer Price Index [PPI]
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Measures changes in the prices of goods and services purchased by producers
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GDP Deflator
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Nominal GDP/Real GDP x 100
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National Accounts
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Keep track of the flows of money between different sectors of the economy
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Household
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Person or group who share income
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Firm
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Organization that produces g/s for sale
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Product Markets
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Where g/s are bought and sold
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Factor Markets
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Where resources, capital and labor, are bought and sold
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Consumer Spending
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Household spending on g/s
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Stock
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A share of ownership in a corporation held by a shareholder
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Bond
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Loan in the form of an IOU that pays interest
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Government Transfers
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Payments by the government to individuals for which no good or service is provided in return
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Disposable Income
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Income remaining for a person to spend or save after all taxes have been paid
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Private Savings
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1) Disposable Income - Consumer Spending 2) Disposable income that is not spent on consumption
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Financial Markets
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Banking, stock, and bond markets, which channel private savings and foreign lending into investment spending, government and foreign borrowing
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Government Borrowing
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The amount of funds borrowed by the government in the financial markets
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Government Purchases of Goods and Services
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Spending by federal, state, and local governments on goods and services
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Exports
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Goods and Services sold to other countries
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Imports
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Goods and services bought from other countries
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Inventories
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Stocks of goods and raw materials held to facilitate business operations
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Investment Spending
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Spending on productive physical capital, such as machinery and construction of structures, and on changes to inventories
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Final Goods and Services
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Goods and services produced for final use
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Intermediate Goods and Services
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Goods and services purchased by firms for further reprocessing and resale for final use
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GDP
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The total market value of all final goods and services produced annually in an economy
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Aggregate Spending
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Consumer Spending + Investment Spending + Government Purchases of goods & services + (exports - imports)
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Value Added
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Value of Sales-Value of Purchases of Inputs
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Net Exports
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Exports - Imports
