Transcript GDPnew – GDPold

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Graphs
&
Curves
Economic
Policies
Unemployment
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Key
Terms
Misc.
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GDP
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What graph is
represented on the
right?
What is PPC graph?
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What is the
point on the
graph on the
right called?
What is equilibrium point (on Demand and
Supply Model)?
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What does the graph
on the right
represent?
What is GDP graph?
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What gap is
shown on the
graph on the
right?
What is recessionary gap?
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What cycle is
being shown on
the right?
What is Business
Cycle?
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The use of taxes, government transfers,
or government purchases of goods and
services to stabilize the economy.
What is fiscal policy?
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Is the central bank’s use of
changes in the quantity of
money or the interest rate to
stabilize the economy.
What is monetary policy?
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The government has two tools for regulating this
policy: a change in government spending or
changes in taxes. The government can also use
both if it thinks the economy needs it. What
tools are these for?
What are tools for regulating fiscal policy?
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If the government were to finance a deficit by
entering the money market and borrow money,
it would make less room for investment, since as
the government’s share grows, everyone else’s
becomes smaller. Then, investment spending
decreases, causing aggregate expenditures to
not increase as much. What is this effect called?
What is Crowding Out Effect?
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Easy money policy → decreased foreign demand for dollars
→ dollar depreciates → net exports increase (AD increases,
strengthening the easy money policy)
Tight money policy → increased foreign demand for dollars
→ dollar appreciates → net exports decrease (aggregate
demand decreases, strengthening the tight money
policy)
What is net export effect?
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Is the percentage of the total number of people in
the labor force who are unemployed. Only
includes those that are actively looking for work
but cannot find a job.
What is unemployment rate?
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Unemployment due to the time
workers spend in job search
(searching or waiting for jobs…recent
college graduates).
What is frictional unemployment?
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Is the deviation of the actual rate of an
unemployment from the natural rate (due
to recession).
What is cyclical unemployment?
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Type of frictional unemployment that
results when there are more people seeking
jobs in a labor market than there are jobs
available at the current wage rate (often
due to creative destruction…new skills
have made old skills outmoded)
What is structural unemployment?
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The unemployment rate that arises
from the effects of frictional plus
structural unemployment. AKA full
employment
What is natural rate of unemployment?
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The total value of all final goods and services
provided in the economy during a given year.
What is Gross Domestic Product or GDP?
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The total value of all final goods and services
produced in the economy during a given year,
calculated using the prices of a selected base
year.
What is real GDP?
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Measures the cost of purchasing a given market
basket in a given year. The index value is
normalized so that it is equal to 100 in the selected
base year.
What is Price Index?
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The GDP growth rate is calculated with the
formula:
Growth Rate= GDPnew – GDPold x 100
GDPold
What is GDP growth?
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For a given year is 100 times the ration of
nominal GDP to real GDP in that year.
What is GDP deflator?
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Resources (anything that can be used to produce
something else) are not unlimited and are not
available in sufficient quantities to satisfy all the
various ways a society wants to use them.
What is scarce/scarcity?
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The real cost of an item, what
you must give up in order to get
it.
What is opportunity cost?
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Branch of economic analysis that describes
the way the economy actually works, fact
based statements.
Ex: unemployment is at 8%
What is Positive Economics?
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The higher the price for a good or service, all
other things being equal, leads suppliers to
supply a greater quantity of that good or service.
Illustrated as a direct or positive relationship.
What is Law of Supply?
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An economic system based on supply &
demand with little or no government
control. Buyers and sellers are allowed to
transact freely based on mutual agreement.
What is Free Market Economics?
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A hypothetical set of consumer purchases of goods and
services.
What is market basket?
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An individual or country is able to produce
MORE total outputs of a good or service with a
given amount of time or resources.
What is absolute advantage?
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Their theory is that when the economy occasionally
diverges from its full-employment output, internal
mechanisms within the economy automatically
move it back to that output. In their opinion, if a
change in AD moves the equilibrium outside of
ASLR, there will be a change in AS that will bring it
back.
What is the “New” Classical Theory
of Economics?
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The higher the price for a good or service,
all other things being equal, leads people
to demand a smaller quantity of that good
or service. Illustrated as an inverse or
negative relationship.
What is Law of Demand?
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Tastes and Preferences
Number of Consumers
Price of Related Goods
Income
Future Expectations
Changes in PRICE do not shift the curve. It only causes
movement along the curve.
What are Shifters of Demand
(changes)?