Economics Chapter 14/15 Test – Flashcards
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business cycle
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The recurring ups and downs of real GDP
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Business fluctuatons
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implies the real GDP will go up and down from time to time, but not a regular and predictable manner
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recessions
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a period of decline in the economy as measured by changes in real GDP
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Peak
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the point where real GDP stops going up
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trough
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the turn around point where real GDP stops going down
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trendline
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if no period of recession and expansion occurred, the economy would follow on even growth path
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depression
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a state of the economy with large numbers of people out of work, acute shortage, and excess capacity in the manufacturing plants
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what has affected the business cycles in the united states
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the great depression
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depression scrip
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currency was in short supply that towns, countries, chambers of commerce
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economic model
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macroeconomic model that uses algebraic equations to describe how the economy behaves
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census
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an official count of all people, including their place of residence
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urban population
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those living in incorporated citites, towns, and villages with 2500 or more people
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rural people
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not living in urban areas
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center of population
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the point where the country would balance if it could be laid flat and all the people weighed the same
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demographers
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people who study growth, density, and other characteristics of population
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fertility rate
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the number of births that 1000 women are expected to undergo in their lifetime
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life expectqancy
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the average reamining life span of people who reach a given age
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net immigration
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considers the net change in population caused by people moving into and out of the country
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baby boom
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the high birthrate years from 1946-1964 to make up a sizeable portion of the population
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population pyramid
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a type of bar graph that shows the breakdown of population by age and sex
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dependent ratio
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a ratio based on the number of children and elderly for every 100 person in the working age bracket of 18 through 64
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real GDP per capita
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the dollar amount of real GDP produced for every person in the economy
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growth triangle
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a table that traces annual rates of growth for various periods of time
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standard of living
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the quality of life based on the possession necessities and luxuries that make life easier
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tax base
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the incomes and properties that are taxes
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revenue resources
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Replenishes resources
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capital to labor ratio
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is obtained by dividing total capital stock by the number of workers in the labor force
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labor productivity
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the rate of growth of output per unit of labor input
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market basket
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good representative of the purchases that will be made over time (must remain fixed after the selection is made)
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consumer price index
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reports on price changes for about 90,000 items in 364 categories
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producer price index
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measures price changed received by domestic producers for their output
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implicit GDP price deflator
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measure price change in GDP
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current/nominal GDP
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not adjusted for inflation
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real GDP (GDP in constant dollars)
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when the distortions of inflations have been removed
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National Income
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NNP ,net national product, minus all taxes that businesses must pay as a cost of doing business
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indirect business taxing
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sales tax
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personal income
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the total amount of income going to consumers before individual income taxes are subtracted
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retained earnings
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the profits that corporation keeps to reinvest in new plants and equipments
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disposable personal income (DI)
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the total amount of income the consumer sector has at it's disposal after individual income taxes
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household
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which is made up of all persons who occupy a house, apartment,or room that constitutes separate living quarters
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unrelated individuals
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as long as the person or persons occupy a separate place of residence, a household
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family
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a group of two or more persons related by blood, marriage, or adoption living together
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personal consumption expendtures
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grocery, rent, book, automotive, clothes, and almost anything else people buy
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gross private domestic investment
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the total value of capital goods created in the economy during the year
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net exports of goods and services
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the difference between the United States export and impacts
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Price Index
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measures changes in price over time
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Macroeconomics
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a nations economic gross output
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National income accounting
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keeps track of production, consumption, saving, and investment in the economy
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GDP
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Gross domestic product; the dollar amount of all the finished goods and services produced within a country's borders in a specific time period, though GDP
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structures
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residential housing, apartments, and buildings for commercial purposes
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intermediate products
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products used in making other products (ex. tires on a car)
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secondhand sales
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the sales of used good - not in GDP
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non-market transactions
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GDP excludes, transaction that do not take place in market (ex.fix your own sink)
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underground economy
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unreported illegal acitivities, plus some legal ones that are not disclosed for tax reasons
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gross national product
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the largest measure of an economy's it is the value of all the products and services produced in one yea
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net national product
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2nd largest. GNP minus deprecation charges for wear and tear on capital equipment
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classifications of a census
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urban - incorporated cities - 2500+ people rural- not urban
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factors affecting growth
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1) fertility rate 2) life expectancy 3)net immigration
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importance of economic growth
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1) Standard of living - the quality of life based on stuff -the ability to increase real per capita output enough to allow people to raise their standard of living 2)government spending -enlarging tax base 3)domestic spending -amount of poverty, etc 4)helping other nations -economic growth increases u.s. demand for foreign trade production 5) global role model -foreign nations tend to copy the u.s
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factors influence economic growth
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land, capital, labor, entrepreneurs, managment, technology
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phases of business cycles
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recession, expansion, depression
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recessions
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a period of decline in the economy as measured by changes in real GDP
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Expansion
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a period of recovery from a recession
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depression
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a state of the economy with large numbers of people out of work, etc.
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causes of business cycle
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1)capital expenditure -when the economy is expanding, businesses expect future sales to be high, so they invest heavily in capital goods 2)inventory adjustments -changes in the level of businesses inventories 3)innovation and imitation -may be a new product or a new way of performing a task 4)monetary factors -the credit & loan policies of commerical banking system and the Federal reserve 5)external shocks -increases in oil prices, war, and national conflict
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capital expenditures
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when the economy is expanding, businesses expect future sales to be high, so they invest heavily in capital goods
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inventory adjustments
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changes in the level of businesses inventories
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innovation and imitation
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may be a new product or a new way of performing a task
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monetary factors
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the credit & loan politices of commerical banking systems and the federal reserve
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external shocks
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increase in oil prices, wars, and national conflict
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standard of living
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quality of life
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government spending
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enlarging tax base
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domestic spending
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amount of poverty
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helping other nations
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economic growth increases U.S. demand for foreign trade production
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global role model
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foreign nations tend to copy the U.S.
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Economic Sectors
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consumer, investment, government, foreign
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sector
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receive various components of the national income, and they use this income to purchase the total output
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consumer sector
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its basic unit is the household which is made up of all persons who occupy a house, apartment, etc
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investment sector
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it is made up of proprietorship, partnerships, and corportations. responsible for bringing the factors of production together to produce the output
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government sector
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macro-economy is the government, or public, sector
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foreign sector
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macroeconomy is the foreign sector, this includes all consumers and producers outside the U.S.
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how to construct a price index
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1) first base year - a year that serves a as comparison is chosen 2)market basket of good is select: goods representative of the purchase that will be made over time - must remain fixed 3) prices of each item in the market basket is recorded and total
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list of price indexs
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consumer price index, produce price index, implicit GDP price delagator
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consumer price index
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reports a price changes for about 90,000 items in 364 categories, compiled monthly
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producer price index
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measure price changes received by domestic producer for their output, what businesses are paying, reported monthly
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implicit GDP price delegator
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measures price changes in GDP, because GDP is a measure of the final output of goods and services and covers thousands of items
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real vs current GDP
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current- not adjusted for inflation real- when the distortions of inflation have been removed
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equation for converting GDP to real dollars
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(current GDP/ implicit GDP price deflator) x100 = GDP in constant dollars
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3 categories of production
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goods, services, structures
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what determines GDP
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1)measurement 2)sampling & survey methods 3)intermediate products 4)secondhand sales 5)production within national borders
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other contribution to GDP
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reporting delays, composition of output, quality of life, exclusion of non-market activites
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5 measures of income
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gross national income, net national product, national income , personal income, disposable personal income
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gross national product
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the total value of goods produced and services provided by a country during one year
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net national product
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2, the nations total income of one year, after depreciation of capital goods has been allowed for.
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national income
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the total amount of money earned within a country.
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personal income
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the total amount of income going to consumers before individual income taxes are subtracted
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disposable personal income
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the total amount of income the consumers sector had at its disposal after individual income taxes
