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Measurement of aggregate economic activity

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National income accounting is defined as the

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Economic policy makers in formulating policies and evaluating performance

answer

National income accounts assist

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Add the values of output from different sectors of the economy, Compare the value of output of one period with that of another, and Provide an index to measure the rate of inflation

answer

Prices are used in national income accounting for what reasons

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The total value added at all stages of production

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A nation's GDP can be calculated as

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Multiplying output by price and adding the resulting dollar values

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DVD players can be added to bicycles to compute the GDP by

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GDP per capita

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Is equal to a nation's GDP divided by its population

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Make international comparisons of the standard of living

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The GDP per capita is the most practical way to

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GDP per capita has increased

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If GDP grows more rapidly than population for a particular country over a period of time, then we can determine that

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remain unchanged

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Suppose you volunteer to help clean up your neighborhood, and the only payment you receive is the sense of goodwill that develops with your neighbors. Your efforts cause the GDP of the economy to

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Right. GDP will increase, ceteris paribus

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Suppose a friend claims he is helping the economy by throwing trash on the street rather than in trash cans because the extra expenditures necessary to clean up the streets will increase GDP. Your friend is

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Productive but excluded from GDP because it is a nonmarket activity

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When an individual makes repairs to her own home instead of hiring a company to make the repairs, the activity is

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Unreported income

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is definitely part of the underground economy

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intermediate good

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A furniture factory produces dining room sets. The lumber it purchases from the lumberyard is a/an

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Greater than the GDP

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If one added up the value of all intermediate goods that went into the production of real GDP, the total value of intermediate goods would be

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How much the economy can produce

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An economy's production possibilities curve indicates

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Inflation

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An increase in the average level of prices of goods and services

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NDP

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The account that gives the most accurate understanding of the economy's potential for growth over the long term is

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Net domestic product

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The national income aggregate calculated by subtracting depreciation from GDP is known as

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Gross investment

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Expenditure on new plants, equipment, and residential construction, plus changes in business inventories`

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Gross investment is greater than depreciation

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An economy's production possibilities are most likely to expand if

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Subtracting depreciation from gross investment

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The addition to the economy's capital stock can be found by

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Two-thirds of total output

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Subtracting depreciation from gross investment

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Increase GDP during that period

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An increase in business inventories during a time period, ceteris paribus, will

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Exports

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Goods and services sold to foreigners

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Net exports

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The value of exports minus the value of imports

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Subtracted from total spending because they are part of another country's GDP

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When we calculate GDP, imports are

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Disposable income

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The measure of what households receive after personal income tax is deducted

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Consumption + saving

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Disposable income is equal to

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Saving

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The measure of the part of disposable income that is not consumed

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Labor force

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all persons age 16 and over who are either employed or actively seeking work

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Unemployment

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the inability of labor force participants to find jobs

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Okun's Law

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a 1 percent increase in unemployment results in a 2 percent decrease in GDP

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Phantom unemployment

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Some people report that they are looking for work, when in fact they are not. This is done to satisfy the job-seeking requirements of welfare reform, or the requirements for receiving unemployment benefits. These people are reported as unemployed, when the truth is they are not in the labor force

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Seasonal unemployment

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unemployment due to seasonal changes in employment

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Frictional unemployment

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brief periods of unemployment experienced by people moving between jobs or into the labor market

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Structural unemployment

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unemployment caused by a mismatch between the skills (or location) of job seekers and the requirements (or location) of available jobs

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Cyclical unemployment

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unemployment caused by a decline in economic activity

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Inflationary flashpoint

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the rate of output at which inflationary pressures intensify.

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Full employment

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the lowest unemployment rate compatible with price stability; zero cyclical unemployment.

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Natural rate of unemployment

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long-term rate of unemployment determined by structural forces in labor and product markets.

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Outsourcing jobs

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relocation of production (and jobs) to other countries to take advantage of lower production costs

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Actively seeking employment and currently not working

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To be officially counted as unemployed, one must be

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national income

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the total income earned by U.S. factors of production

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NFFI

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income earned by foreigners producing American goods minus income earned by Americans producing foreign goods

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Labor force that are not employed

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The unemployment rate is interpreted as the percentage of the

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Transfer payments

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The government does issue transfer payments to people

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Not in the labor force

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The full-time homemakers and retirees are classified in the BLS data as

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Is in the process of voluntarily switching jobs

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The best example of a "frictionally unemployed" worker is one who

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structural unempolyment

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A worker who loses a job at a call center because business firms switch the call center to another country is an example of

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Frictionally unemployed

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New college graduates still looking for their first jobs would be classified in the BLS data as:

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Cyclical unemployment

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A headline states: "Real GDP falls again as the economy slumps." This condition is most likely to produce what type of unemployment?

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inflation

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A rise in that average price level

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deflation

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A decrease in that average price level

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relative price

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the price of one good compared to the price of other goods

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Money illusion

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using nominal dollars rather than real dollars to gauge changes in one's income or wealth

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bracket creep

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the movement of taxpayers into higher tax brackets as nominal income grows

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consumer price index

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a measure of the average price of consumer goods and services

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inflation rate

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the annual percentage rate of increase in the average rate

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Core inflation

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changes in CPI, excluding food and energy prices

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Producer price index

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changes in the average prices at intermediate steps of production

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GDP deflator

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changes in prices of all goods and services included in GDP

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price stability

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the absence of significant changes in the average price level

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demand-pull inflation

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results from excessive pressure to buy on the demand side of the economy

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cosh-push inflation

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due to higher production costs putting pressure on suppliers to push up prices

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Cost of living allowances

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nominal incomes are indexed to automatically rise at the same rate as inflation

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Adjustable-rate mortgage

answer

interest rate on a mortgage rises along with inflation so that lenders do not lose money

Econ 204 Ch.5,6 – Flashcards

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