MacroEcon 1,4,5,6 – Flashcards

question
What is economics?
answer
Economics is the study of how agents choose to allocate their scare resources and how those choices affect society.
question
Economics can be divided into what two kinds of analysis?
answer
positive analysis (what people actually do) and normative analysis (what people ought to do)
question
Economics is based on what three key principles?
answer
optimization, equilibrium, and empiricism
question
What is optimization?
answer
Optimization is choosing the best feasible option, given the available information.
question
What is equilibrium?
answer
Equilibrium is a situation in which nobody would benefit personally by changing his or her own behavior.
question
What is empiricism?
answer
Empiricism is evidence based analysis.
question
economic agent
answer
an economic agent is an individual or a group that makes choices e.g. consumer, parent, student, etc
question
scarce resources
answer
scarce resources are things that people want, whee the quantity that people exceeds the quantity that is available
question
why does scarcity exist
answer
scarcity exists because people have unlimited wants in a world of limited resources
question
macroeconomics
answer
macroeconomics is the study of the economy as a whole
question
trade-offs
answer
trade-offs arise when some benefits must be given up in order to gain others
question
budget constraints
answer
a budget constraint is the set of things that a person can choose to do (or buy) without breaking her budget.
question
opportunity cost
answer
the best alternative activity
question
cost-benefit analysis
answer
cost-benefit analysis is a calculation that adds up costs and benefits using a common unit of measurement, like dollars
question
For every choice a person makes it can be assumed that a. the choose has full knowledge of the situation. b. a good is involved and satisfaction is gained. c. there is a fifty-fifty chance the choice was the wrong one. d. some opportunity cost was involved
answer
d. some opportunity cost was involved.
question
Which of the following statements is FALSE about opportunity cost? a. John wants a burger and fries. The concept of opportunity cost applies even though he has enough funds to buy both. b. Opportunity cost is the next best alternative. c. cost is always forgone opportunity. d. opportunity cost exist only for goods with monetary values.
answer
d. opportunity cost exist only for goods with monetary values.
question
Mariko is buying a soft drink. She can choose between iced tea, cola, and diet cola. She doesn't like diet cola, and after some thought, she chooses iced tea. What is the opportunity cost of this choice? a. the iced tea, the cola, and the diet cola b. the cola, and the diet cola c. the diet cola d. the cola
answer
d. the cola
question
opportunity cost is a. the highest valued alternative that must be given up to engage in an activity. b. when unlimited wants exceed the limited resources available to fulfill those wants. c. when consumers and firms use all available information as they act to achieve their goals. d. the idea that because of scarcity, producing more of one good or service means producing less of another good or service.
answer
a. the highest valued alternative that must be given up to engage in an activity.
question
Bill Bonecrusher graduates from college witha choice of playing professional football at 2 million a year or coaching for 50,000 a year. HE decides to play football, but eight years later he quits football to make movies for 3 million a year. His opportunity cost at graduation was_____ and eight years later was ____. a. 2 million; 3 million b. 2 million; 2 million c. 50,000; 2 million d. 50,000; 50,000
answer
c. 50,000; 2 million
question
Steven and Karen decide to attend the same concert when they are each given free tickets to it. We know that a. neither bears an opportunity cost since the tickets were given free to them. b. both bear the same opportunity cost because the tickets have the same face value. c. both bear the same opportunity cost because they are seeing the same thing. d. both bear an opportunity cost that depends on what each person is giving up to attend the concert.
answer
d. both bear an opportunity cost that depends on what each person is giving up to attend the concert.
question
A student has a job that pays a wage rate of $10 per hour. The night before the economics exam, the student has set aside four hours to study for the exam, estimating that for each hour spent studying, her grade will rise by 5 points. That night, she gets a call from her employer to come to work for a wage rate of $15 per hour for that night. She decides to work for three hours and earn an extra $45.00. The next day she takes the test and gets a grade of 75. The opportunity cost of her work is a. the $45 she earned. b. the entire four hours she set aside for studying. c. the 15 extra points she estimates that she could have earned on the exam if she had studied the extra three hours. d. the three hours she did not study.
answer
c. the 15 extra points she estimates that she could have earned on the exam if she had studied the extra three hours.
question
Fred and Ann both decide to see the same movie when they are given free movie tickets. We know that a. both bear an opportunity cost since they could have done other things instead of see the movie. b. both bear the same opportunity cost since they are doing the same thing. c. the cost of going to the movie is greater for the one who had more choices to do other things. d. neither bears an opportunity cost because the tickets were free.
answer
a. both bear an opportunity cost since they could have done other things instead of see the movie.
question
Opportunity cost a. only is considered for goods in short supply b. is the value of all alternative forgone as a result of choosing some given alternative. c. is the value of the next best alternative as a result of choosing some given alternative. d. either B or C.
answer
c. is the value of the next best alternative as a result of choosing some given alternative.
question
Suppose that you grade point average and academic record are the most important thing to you. What is the opportunity cost of spending 2 hours studying for a biology exam? a. time spent bowling with friends b. you lost income from not working. c. time spent studying for one of you other classes. d. basic leisure time.
answer
c. time spent studying for one of you other classes.
question
which of the following is true regarding the concept of causation? a. it states that if event A causes event B, then event B cannot have a causal effect on event A. b. For any two events that occur, economists state that the first must have caused the second, since it came first. c. It describes how one even can bing abut change in another. d. it states that if event A causes event B, then event B must also cause event A.
answer
c. It describes how one even can bing abut change in another.
question
which of the following could be considered an economic agent? a. sports teams b. senators c. parents d. consumers
answer
all of the above
question
scarcity is the situation of having____ wants in the world of _____ resources.
answer
unlimited and limited
question
which of the following are considered scarce resources? a. time b. oil c. pepperoni pizzas d. gold.
answer
all of the above
question
How does microeconomics differ from macroeconomics?
answer
microeconomics is the study of how individuals, households, firms, and governments make choices, whole macroeconomics is the study of the economy as a whole.
question
which of the following is NOT an item studied under microeconomics? a. individual preferences b. cigarette taxes c. the inflation rate d. prices of individual goods
answer
c. the inflation rate
question
economists study______; therefore, the unifying feature of economics is a focus on_____.
answer
all human behavior; choice
question
economics, anthropology, psychology, sociology, and political science all study human behavior. economics differs from these other social sciences because it also addresses these three key concepts:
answer
optimization, equilibrium, and empiricism
question
the concept of opportunity cost is a measure of_____.
answer
the value of the best alternative use of resource.
question
suppose that you allocate $20 each week for your entertainment budget. This money is spent of two items: either renting movies for $1 each at Redbox or downloading songs from iTunes at $1 each. Which of the following would represent your budget constraint for entertainment?
answer
amount spent on iTunes + amount spend at Redbox = $20
question
a budget constraint illustrates the concept of _____, since as you increase your purchases of one item, you must__________.
answer
trade-offs; must decrease your purchases of the other item
question
suppose the market price of corn is $5.50 per bushel. which of the following is NOT one of the three conditions that will need to be satisfied for the corn market to be in equilibrium at this price? a. the cost to corn farmers of growing the corn must be less than $5.50 per bushel. b. the buyers of corn will only use it for activities that they feel are worth at least $5.50 per bushel. c. both the buyers and sellers of corn could benefit by making small changes to their market behaviors. d. the quantity of corn produced by corn farmers will equal the quantity purchased by buyers.
answer
c. both the buyers and sellers of corn could benefit by making small changes to their market behaviors.
question
free riding occurs when_______ are out of sync with ________.
answer
people's private benefits; the public interest
question
which of the following is subject to the free-rider problem? a. public libraries b. a neighborhood watch c. national security d. all of the above
answer
all of the above
question
which of the following is more susceptible to the free rider problem: government-funded symphonies or city-wide pest control?
answer
use of city-wide pest control is more susceptible since even those who don't pay taxes still benefit, while government-funded symphonies can charge for admission
question
free riding occurs because_______
answer
people sometimes pursue their own private interests and don't contribute voluntarily to the public interest.
question
a surge in cocoa prices is______ and a pest attack on the cocoa crop is the _____
answer
an effect; the cause
question
which of the following is true regarding the concept of causation a. it states that if event A causes event B, then event B cannot have a causal effect on event A. b. for any two events that occur, economists state that the first must have caused the second, since it came first. c. it describes how one event can bring about change in another. d. it states that if event A causes event B, then event B must also cause event A.
answer
c. it describes how one event can bring about change in another.
question
in which of the following areas will taking an economics course help benefit you throughout your life? a. it will help you analyze and predict human behavior in a variety of situations b. it will instill the concept that what activity is given up by a decision plays an important role when making choices. c. it will given you a logic behind using cost-benefit analysis when evaluating decisions. d. all of the above
answer
d. all of the above
question
economist say the opportunity cost of an activity
answer
includes the value of the alternative use of your time
question
positive economic analysis
answer
involves objective statements that can be disproven using data
question
normative economic analysis
answer
may include subjective and ethical judgements.
question
Market
answer
a market is a group of economic agents who are trading a good or service, and the rules and arrangements for trading
question
market price
answer
if all sellers and all buyers face the same price, that price is referred to as the market price.
question
in a perfectly competitive market...
answer
(1) sellers all sell an identical good or service (2) any individual buyer or and individual seller isn't powerful enough on his or her own to affect the market price
question
price takers
answer
buyers and sellers accept the market price and can't bargain for a better price
question
quantity demanded
answer
is the amount of the good or service that buyers are willing to purchase at a given price
question
holding all else equal
answer
everything other than the price of gas is held constant or fixed
question
negatively related
answer
two variables are negatively related if the variables move in opposite direction
question
law of demand
answer
the quantity demanded rises when the price falls (holding all else equal)
question
willingness to pay
answer
is the highest price that a buyer is willing to pay for an extra unit of a good
question
diminishing marginal benefit
answer
as you consume more of a good, your willingness to pay for an additional unit declines
question
market demand curve
answer
the demand of all buyers in a market
question
demand curve shifts only
answer
when the quantity demanded changes at a given price
question
movements along the demand curve only
answer
when a good's price changes
question
the demand curve shifts when these factors change:
answer
1. taste and preferences 2. income and wealth 3. availability and priced of related goods 4. number and scale of buyers 5. buyer's belief about the future
question
the ONLY reason for a movement along the demand curve:
answer
a change in the price of the good itself
question
quantity supplied
answer
the amount of the good or service that sellers are willing to supply at a given price
question
positively related
answer
two variables are positively related if the variables move in the same direction eg price and supply of oil
question
willingness to accept
answer
the lowest price that a seller is willing to get paid to sell and extra unit of a good.
question
input
answer
an input is a good or service used to produce another good or service
question
the supply curve shifts when these factors change:
answer
1. prices of inputs 2. technology used 3. number and scale of buyers 4. seller's beliefs about the future
question
the ONLY reason for a movement along the supply curve:
answer
a change in the price of the good itself
question
the competitive equilibrium
answer
is the crossing point of the supply curve and the demand curve
question
the competitive equilibrium price
answer
equates quantity supplied and quantity demanded
question
the competitive equilibrium quantity
answer
is the quantity that corresponds to the competitive equilibrium price
question
excess supply
answer
occurs when the market price is above the competitive equilibrium price, so quantity supplied exceeds quantity demanded
question
excess demand
answer
occurs when the market price is below the competitive equilibrium price, so quantity demanded exceeds quantity supplied
question
what happens when prices are not free to fluctuate?
answer
when prices are not free to fluctuate, markets fail to equate quantity demanded and quantity supplied
question
income per capita
answer
income per person
question
recession
answer
is an economic downturn lasting at least two quarters
question
unemployed
answer
he or she (1) does not have a job, (2) has actively looked for work in the prior four weeks
question
national income accounts
answer
measure the level of aggregate economic activity in a country
question
the National Income and Product Accounts
answer
is the system of national income accounts that is used by the US government.
question
gross domestic product
answer
is a measure of aggregate economic activity. it is the market value of the final goods and services produced within the borders of a country during a particular period of time
question
economic flows
answer
production, expenditure, income, and factors of production
question
National income and accounting identity
answer
Y=C+I+G+X-M y is the total market value of goods and services c is consumption i is investments g is government expenditure x is exports m is imports
question
what isn't measured by GDP
answer
physical capital depreciation home production the underground economy negative externalities
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gross national product
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is the market value of production owned by residents of a particular country
question
GDP per capita turns out to be an excellent predictor of
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life satisfaction
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inflation rate
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the rate of increase in prices
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GDP is defined in three equivalent ways:
answer
production=expenditure=income
question
GDP deflator
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is a measure of the overall level of prices in the economy
question
CPI
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is another measure of the overall level of prices in the economy
question
Both the GDP deflator and CPI can be used to measure the overall rate at which prices are rising:
answer
inflation rate
question
income per capita=
answer
GDP per capita= GPD/total population
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we can compare income differences across countries using GDP per capita at current e
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GDP per capita at current exchange rates or adjusted for purchasing power parity differences
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productivity
answer
refers to the value of the goods and services that a worker generates each hour of work
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productivity differences:
answer
human capital physical capital technology
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aggregate production function
answer
Y=A * F (K,H) y is GDP k is physical capital stock h is the efficiency units of labor the function F signifies that there is a relationship between physical capital, labor, and GDP A is an index of technology
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question
What is economics?
answer
Economics is the study of how agents choose to allocate their scare resources and how those choices affect society.
question
Economics can be divided into what two kinds of analysis?
answer
positive analysis (what people actually do) and normative analysis (what people ought to do)
question
Economics is based on what three key principles?
answer
optimization, equilibrium, and empiricism
question
What is optimization?
answer
Optimization is choosing the best feasible option, given the available information.
question
What is equilibrium?
answer
Equilibrium is a situation in which nobody would benefit personally by changing his or her own behavior.
question
What is empiricism?
answer
Empiricism is evidence based analysis.
question
economic agent
answer
an economic agent is an individual or a group that makes choices e.g. consumer, parent, student, etc
question
scarce resources
answer
scarce resources are things that people want, whee the quantity that people exceeds the quantity that is available
question
why does scarcity exist
answer
scarcity exists because people have unlimited wants in a world of limited resources
question
macroeconomics
answer
macroeconomics is the study of the economy as a whole
question
trade-offs
answer
trade-offs arise when some benefits must be given up in order to gain others
question
budget constraints
answer
a budget constraint is the set of things that a person can choose to do (or buy) without breaking her budget.
question
opportunity cost
answer
the best alternative activity
question
cost-benefit analysis
answer
cost-benefit analysis is a calculation that adds up costs and benefits using a common unit of measurement, like dollars
question
For every choice a person makes it can be assumed that a. the choose has full knowledge of the situation. b. a good is involved and satisfaction is gained. c. there is a fifty-fifty chance the choice was the wrong one. d. some opportunity cost was involved
answer
d. some opportunity cost was involved.
question
Which of the following statements is FALSE about opportunity cost? a. John wants a burger and fries. The concept of opportunity cost applies even though he has enough funds to buy both. b. Opportunity cost is the next best alternative. c. cost is always forgone opportunity. d. opportunity cost exist only for goods with monetary values.
answer
d. opportunity cost exist only for goods with monetary values.
question
Mariko is buying a soft drink. She can choose between iced tea, cola, and diet cola. She doesn't like diet cola, and after some thought, she chooses iced tea. What is the opportunity cost of this choice? a. the iced tea, the cola, and the diet cola b. the cola, and the diet cola c. the diet cola d. the cola
answer
d. the cola
question
opportunity cost is a. the highest valued alternative that must be given up to engage in an activity. b. when unlimited wants exceed the limited resources available to fulfill those wants. c. when consumers and firms use all available information as they act to achieve their goals. d. the idea that because of scarcity, producing more of one good or service means producing less of another good or service.
answer
a. the highest valued alternative that must be given up to engage in an activity.
question
Bill Bonecrusher graduates from college witha choice of playing professional football at 2 million a year or coaching for 50,000 a year. HE decides to play football, but eight years later he quits football to make movies for 3 million a year. His opportunity cost at graduation was_____ and eight years later was ____. a. 2 million; 3 million b. 2 million; 2 million c. 50,000; 2 million d. 50,000; 50,000
answer
c. 50,000; 2 million
question
Steven and Karen decide to attend the same concert when they are each given free tickets to it. We know that a. neither bears an opportunity cost since the tickets were given free to them. b. both bear the same opportunity cost because the tickets have the same face value. c. both bear the same opportunity cost because they are seeing the same thing. d. both bear an opportunity cost that depends on what each person is giving up to attend the concert.
answer
d. both bear an opportunity cost that depends on what each person is giving up to attend the concert.
question
A student has a job that pays a wage rate of $10 per hour. The night before the economics exam, the student has set aside four hours to study for the exam, estimating that for each hour spent studying, her grade will rise by 5 points. That night, she gets a call from her employer to come to work for a wage rate of $15 per hour for that night. She decides to work for three hours and earn an extra $45.00. The next day she takes the test and gets a grade of 75. The opportunity cost of her work is a. the $45 she earned. b. the entire four hours she set aside for studying. c. the 15 extra points she estimates that she could have earned on the exam if she had studied the extra three hours. d. the three hours she did not study.
answer
c. the 15 extra points she estimates that she could have earned on the exam if she had studied the extra three hours.
question
Fred and Ann both decide to see the same movie when they are given free movie tickets. We know that a. both bear an opportunity cost since they could have done other things instead of see the movie. b. both bear the same opportunity cost since they are doing the same thing. c. the cost of going to the movie is greater for the one who had more choices to do other things. d. neither bears an opportunity cost because the tickets were free.
answer
a. both bear an opportunity cost since they could have done other things instead of see the movie.
question
Opportunity cost a. only is considered for goods in short supply b. is the value of all alternative forgone as a result of choosing some given alternative. c. is the value of the next best alternative as a result of choosing some given alternative. d. either B or C.
answer
c. is the value of the next best alternative as a result of choosing some given alternative.
question
Suppose that you grade point average and academic record are the most important thing to you. What is the opportunity cost of spending 2 hours studying for a biology exam? a. time spent bowling with friends b. you lost income from not working. c. time spent studying for one of you other classes. d. basic leisure time.
answer
c. time spent studying for one of you other classes.
question
which of the following is true regarding the concept of causation? a. it states that if event A causes event B, then event B cannot have a causal effect on event A. b. For any two events that occur, economists state that the first must have caused the second, since it came first. c. It describes how one even can bing abut change in another. d. it states that if event A causes event B, then event B must also cause event A.
answer
c. It describes how one even can bing abut change in another.
question
which of the following could be considered an economic agent? a. sports teams b. senators c. parents d. consumers
answer
all of the above
question
scarcity is the situation of having____ wants in the world of _____ resources.
answer
unlimited and limited
question
which of the following are considered scarce resources? a. time b. oil c. pepperoni pizzas d. gold.
answer
all of the above
question
How does microeconomics differ from macroeconomics?
answer
microeconomics is the study of how individuals, households, firms, and governments make choices, whole macroeconomics is the study of the economy as a whole.
question
which of the following is NOT an item studied under microeconomics? a. individual preferences b. cigarette taxes c. the inflation rate d. prices of individual goods
answer
c. the inflation rate
question
economists study______; therefore, the unifying feature of economics is a focus on_____.
answer
all human behavior; choice
question
economics, anthropology, psychology, sociology, and political science all study human behavior. economics differs from these other social sciences because it also addresses these three key concepts:
answer
optimization, equilibrium, and empiricism
question
the concept of opportunity cost is a measure of_____.
answer
the value of the best alternative use of resource.
question
suppose that you allocate $20 each week for your entertainment budget. This money is spent of two items: either renting movies for $1 each at Redbox or downloading songs from iTunes at $1 each. Which of the following would represent your budget constraint for entertainment?
answer
amount spent on iTunes + amount spend at Redbox = $20
question
a budget constraint illustrates the concept of _____, since as you increase your purchases of one item, you must__________.
answer
trade-offs; must decrease your purchases of the other item
question
suppose the market price of corn is $5.50 per bushel. which of the following is NOT one of the three conditions that will need to be satisfied for the corn market to be in equilibrium at this price? a. the cost to corn farmers of growing the corn must be less than $5.50 per bushel. b. the buyers of corn will only use it for activities that they feel are worth at least $5.50 per bushel. c. both the buyers and sellers of corn could benefit by making small changes to their market behaviors. d. the quantity of corn produced by corn farmers will equal the quantity purchased by buyers.
answer
c. both the buyers and sellers of corn could benefit by making small changes to their market behaviors.
question
free riding occurs when_______ are out of sync with ________.
answer
people's private benefits; the public interest
question
which of the following is subject to the free-rider problem? a. public libraries b. a neighborhood watch c. national security d. all of the above
answer
all of the above
question
which of the following is more susceptible to the free rider problem: government-funded symphonies or city-wide pest control?
answer
use of city-wide pest control is more susceptible since even those who don't pay taxes still benefit, while government-funded symphonies can charge for admission
question
free riding occurs because_______
answer
people sometimes pursue their own private interests and don't contribute voluntarily to the public interest.
question
a surge in cocoa prices is______ and a pest attack on the cocoa crop is the _____
answer
an effect; the cause
question
which of the following is true regarding the concept of causation a. it states that if event A causes event B, then event B cannot have a causal effect on event A. b. for any two events that occur, economists state that the first must have caused the second, since it came first. c. it describes how one event can bring about change in another. d. it states that if event A causes event B, then event B must also cause event A.
answer
c. it describes how one event can bring about change in another.
question
in which of the following areas will taking an economics course help benefit you throughout your life? a. it will help you analyze and predict human behavior in a variety of situations b. it will instill the concept that what activity is given up by a decision plays an important role when making choices. c. it will given you a logic behind using cost-benefit analysis when evaluating decisions. d. all of the above
answer
d. all of the above
question
economist say the opportunity cost of an activity
answer
includes the value of the alternative use of your time
question
positive economic analysis
answer
involves objective statements that can be disproven using data
question
normative economic analysis
answer
may include subjective and ethical judgements.
question
Market
answer
a market is a group of economic agents who are trading a good or service, and the rules and arrangements for trading
question
market price
answer
if all sellers and all buyers face the same price, that price is referred to as the market price.
question
in a perfectly competitive market...
answer
(1) sellers all sell an identical good or service (2) any individual buyer or and individual seller isn't powerful enough on his or her own to affect the market price
question
price takers
answer
buyers and sellers accept the market price and can't bargain for a better price
question
quantity demanded
answer
is the amount of the good or service that buyers are willing to purchase at a given price
question
holding all else equal
answer
everything other than the price of gas is held constant or fixed
question
negatively related
answer
two variables are negatively related if the variables move in opposite direction
question
law of demand
answer
the quantity demanded rises when the price falls (holding all else equal)
question
willingness to pay
answer
is the highest price that a buyer is willing to pay for an extra unit of a good
question
diminishing marginal benefit
answer
as you consume more of a good, your willingness to pay for an additional unit declines
question
market demand curve
answer
the demand of all buyers in a market
question
demand curve shifts only
answer
when the quantity demanded changes at a given price
question
movements along the demand curve only
answer
when a good's price changes
question
the demand curve shifts when these factors change:
answer
1. taste and preferences 2. income and wealth 3. availability and priced of related goods 4. number and scale of buyers 5. buyer's belief about the future
question
the ONLY reason for a movement along the demand curve:
answer
a change in the price of the good itself
question
quantity supplied
answer
the amount of the good or service that sellers are willing to supply at a given price
question
positively related
answer
two variables are positively related if the variables move in the same direction eg price and supply of oil
question
willingness to accept
answer
the lowest price that a seller is willing to get paid to sell and extra unit of a good.
question
input
answer
an input is a good or service used to produce another good or service
question
the supply curve shifts when these factors change:
answer
1. prices of inputs 2. technology used 3. number and scale of buyers 4. seller's beliefs about the future
question
the ONLY reason for a movement along the supply curve:
answer
a change in the price of the good itself
question
the competitive equilibrium
answer
is the crossing point of the supply curve and the demand curve
question
the competitive equilibrium price
answer
equates quantity supplied and quantity demanded
question
the competitive equilibrium quantity
answer
is the quantity that corresponds to the competitive equilibrium price
question
excess supply
answer
occurs when the market price is above the competitive equilibrium price, so quantity supplied exceeds quantity demanded
question
excess demand
answer
occurs when the market price is below the competitive equilibrium price, so quantity demanded exceeds quantity supplied
question
what happens when prices are not free to fluctuate?
answer
when prices are not free to fluctuate, markets fail to equate quantity demanded and quantity supplied
question
income per capita
answer
income per person
question
recession
answer
is an economic downturn lasting at least two quarters
question
unemployed
answer
he or she (1) does not have a job, (2) has actively looked for work in the prior four weeks
question
national income accounts
answer
measure the level of aggregate economic activity in a country
question
the National Income and Product Accounts
answer
is the system of national income accounts that is used by the US government.
question
gross domestic product
answer
is a measure of aggregate economic activity. it is the market value of the final goods and services produced within the borders of a country during a particular period of time
question
economic flows
answer
production, expenditure, income, and factors of production
question
National income and accounting identity
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Y=C+I+G+X-M y is the total market value of goods and services c is consumption i is investments g is government expenditure x is exports m is imports
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what isn't measured by GDP
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physical capital depreciation home production the underground economy negative externalities
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gross national product
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is the market value of production owned by residents of a particular country
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GDP per capita turns out to be an excellent predictor of
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life satisfaction
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inflation rate
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the rate of increase in prices
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GDP is defined in three equivalent ways:
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production=expenditure=income
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GDP deflator
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is a measure of the overall level of prices in the economy
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CPI
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is another measure of the overall level of prices in the economy
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Both the GDP deflator and CPI can be used to measure the overall rate at which prices are rising:
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inflation rate
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income per capita=
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GDP per capita= GPD/total population
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we can compare income differences across countries using GDP per capita at current e
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GDP per capita at current exchange rates or adjusted for purchasing power parity differences
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productivity
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refers to the value of the goods and services that a worker generates each hour of work
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productivity differences:
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human capital physical capital technology
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aggregate production function
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Y=A * F (K,H) y is GDP k is physical capital stock h is the efficiency units of labor the function F signifies that there is a relationship between physical capital, labor, and GDP A is an index of technology