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Macro Ch 12, 13, 15
Review for test 2 in Econ 203
43
Economics
Undergraduate 2
01/12/2011

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Term
Productivity
Definition
the quantity of goods and services produced from each unit of labor input
Term
Physical capital
Definition
the stock of equipment and structures that are used to produce goods and services
Term
human capital
Definition
knowledge and skills that workers acquire throughout education, training, and experience
Term
Natural resources
Definition
the inputs into the production of goods and services that are provided by nature such as land, rivers, and mineral deposits
Term
Technological knowledge
Definition
society's understanding of the best ways to produce goods and services
Term
diminishing returns
Definition
the property whereby the benefit from an extra unit of an input declines as the quantity of the input increase
Term
catch-up effect
Definition
the property whereby countries that start of poor tend to grow more rapidly than countries that start off rich
Term
Population Growth
Definition
Stretching natural resources, Diluting the capital stock (K/L or H/L), Promoting technological progress
Term
Financial System
Definition
the group of institutions in the economy that help to match one person's saving with another person's investment
Term
financial markets
Definition
financial institutions through which savers can directly provide funds to borrowers
Term
Bond
Definition
a certificate of indeptedness
Term
Stock
Definition
a claim to partial ownership in a firm
Term
financial intermediaries
Definition
financial institutions through which savers can indirectly provide funds to borrowers
Term
Mutual fund
Definition
an institution that sells shares to the public and uses the proceeds to buy a portfolio of stocks and bonds
Term
determinants of productivity
Definition
technology, natural resources, human capital, capital stock, and physical stock
Term
diminishing returns to capital
Definition
growth from investment eventually slows down and poor countries may "catch up" to rich ones
Term
Private Savings
Definition
Portion of households' income that is not used for consumption or paying taxes (Y-T-C)
Term
Public Savings
Definition
Tax revenue less government spending (T-G)
Term
National Savings
Definition
Private Saving + Public Savings ((Y-T-C)+(T-G) or Y-C-G)
Term
Investment
Definition
always equals National Savings
Term
Saving
Definition
investment in a closed economy system
Term
Budget surplus
Definition
excess of tax revenue over government spending (T-G)
Term
Budget Deficit
Definition
Shortfall of tax revenue from government spending (G-T)
Term
Crowding out
Definition
a decrease in investment that results from government borrowing
Term
Market of Loanable Funds
Definition
the market in which those who want to save supply funds and those who want to borrow to invest demand funds
Term
Supply side is
Definition
saving; positive slope
Term
demand side
Definition
investors; negative slope
Term
A budget deficit reduces
Definition
national saving and supply of loanable funds
Term
Government cuts deficit
Definition
supply curve moves to the right
Term
US Government Debt
Definition
95%; debt to GDP is useful measure of the governments indebtedness
Term
Labor force
Definition
the total number of workers, including both the employed and the unemployed (Number of employed +number of unemployed)
Term
unemployment rate
Definition
the percentage of the labor force that is unemployed
(Number unemployed/labor force x 100)
Term
Labor-Force Participation Rate
Definition
the percentage of the adult population that is in the labor force (Labor force/ Adult population x 100)
Term
natural rate of unemployment
Definition
the normal rate of unemployment around which the unemployment rate fluctuates
Term
cyclical unemployment
Definition
the deviation of unemployment from its natural rate
Term
discouraged workers
Definition
individuals who would like to work but have given up looking for a job
Term
natural unemployment
Definition
reflects trends in economy; US is about 5%
Term
Frictional Unemployment
Definition
worker searches for a job for their particular skill set
Term
Structural Unemployment
Definition
fewer jobs than people; usually long term
Term
Minimum wage laws
Definition
may exceed equilibrium wage; Small cause of Structural unemployment
Term
union
Definition
exert their market power to negotiatehigher wages for workers. Causes structural unemployment
Term
Efficiency wage theory
Definition
Cause of structural unemployment;
Term
Unemployment Insurance
Definition
a govt program that partially protects workers’
incomes when they become unemployed
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