Macroeconomics Test 2 Review Essays - National Accounts, Free Essays

Macroeconomics Test 2 Review Essays - National Accounts, Free Essays Macroeconomics Test 2 Review CHAPTER 7 GDP (Gross Domestic Product): Aggregate output as the dollar value of all final goods and services produced within the boarders of a country during a specific period of time Expenditures Approach: The method that adds all expenditures for all final goods and final services to measure the GDP GDP= C + Ig + G + Xn oPersonal Consumption Expenditures (C): Covers all expenditures by households on goods and services oGross Private Domestic Investment (Ig): Expenditures for newly produced capital goods and for additions to inventories Net Investment= Gross Investment Depreciation oGovernment Purchases (G): All government expenditures on final goods and all direct purchases of resources oNet Export (Xn): Exports (X) Imports (M) Income Approach: The method that adds all the income generated by the production of final goods and final services to measure the GDP Wages Rents Interest Profits Statistical Adjustment Intermediate Goods: Products that are purchased for resale or further processing or manufacturing. Value Added: The values of a product sold by a firm less the value of the products (materials) purchased and used by the firm to produce that product Net Domestic Product: The nations total output available for consumption or additions to the capital stock. NDP= GDP Consumption of Fixed Capital (Depreciation) National Income= (NDP Statistical discrepancy) + Net Foreign Factor Income Personal Income= National Income Taxes on Production and Imports Social Security Contributions Corporate Income Taxes Undistributed Corporate Profits + Transfer payments Disposable Income= C + S Nominal GDP: GDP based on the prices that prevailed when the output was produced Real GDP: GDP that has been deflated or inflated to reflect changed in the price level Price Index: A measure of the price of a specified collection of goods and services, in a given year as compared to the price of an indentical collection of goods and services in a reference year Price Index Price= (Price of market basket in specific year) / (Price of some market basket in base year) Chapter 8 Economic Growth: An increase in Real GDP occurring over some time period; An increase in Real GDP per capita occurring over some time period Real GDP Per Capita: The amount of real output per person in a country Real GDP per Capita= Real GDP/ Population Rule of 70: Provides a quantitative grasp of the effect of economic growth It finds the numbers of years it will take for some measure to double, given its annual % increase, by dividing that percentage increase into the # 70 Approximate # of years 70 / required to = Annual Percentage double real GDP Rate of Growth Chapter 9 Four Phases of the Business Cycle: Peak, Recession, Trough and Expansion Peak: Business activity is at maximum, price level rises, economy is at or near full employment, level of real output is at or close economys capacity Recession: Decline in total output, income, and employment Trough: Output and employment bottom out at their lowest levels Expansion: Real GDP, income, and employment rise oInflation can occur in expansion because there can be more spending than production capacity Unemployment Rate: The percentage of the labor forced unemployed Unemployment Rate= Unemployed / Labor Force oUnemployed= Labor Force Employed Three Types of Unemployment: Frictional Unemployment, Structural Unemployment, and Cyclical Unemployment Frictional Unemployment: Workers who are either searching for jobs or waiting to take jobs in the near future Structural Unemployment: Workers who skills are not demanded by employers Cyclical Unemployment: Caused by sufficient spending and begins in the recession phase Natural Rate of Employment: The economy is said to be producing its potential output Opportunity Cost of Unemployment? Lost production output GDP Gap= Actual GDP Potential GDP Okuns Law: For every 1% by which the actual unemployment rater exceeds the natural rate, a negative GDP gap of about 2% occurs Consumer Price Index: Measures the prices of a fixed market basket of some 300 goods and services bought by a typical consumer CPI= (Price of the most recent market basket in the production year) / (Price estimate of the market basket in 1982-1984) X 100 Rate of Inflation= (CPI from one year CPI from previous year) / (CPI from previous year) X 100 2 types of inflation: Demand-Pull and Cost-Push Demand-Pull Inflation: Too much spending chasing too few goods Cost-Push Inflation: Increasing the price level resulting from an increase in resource cost Per-Unit Production Costs: The average cost of a particular level of output Per-Unit Production Cost= (Total Input Cost) / (Units of Output) CHAPTER 10 Income Consumption and Saving have a direct or positive relationship Disposable Income=