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Economics
Test #2
53
Economics
Undergraduate 3
10/19/2012

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Term
flow
Definition
a rate; variable measured over time; the time dimension is critical to giving meaning to the value
Term
stock
Definition
an absolute amount; a varible measured at a given point in time
Term
mercantilism
Definition
a nation's wealth is determined by its stock of precious metals
Term
zero sum game
Definition
one party gains at the expense of the other
Term
gross domesitc product
Definition
output from resources physically located within the boundaries of the particular country
Term
gross national product
Definition
output from resources owned by citizens of the particular country (regardless of where the resources are located)
Term
income or earnings approach
Definition
add up all of the earnings received by all the households in the economy
Term
expenditures approach
Definition
add up all types of spending on final goods and services
Term
personal consumption expenditures
Definition
house holds -> consumption (C)
Term
gross private domestic investment
Definition
businesses -> investment (I)
Term
government consumption expenditures and investment
Definition
Government -> government purchases (G)
Term
net exports of goods and services
Definition
foreigners -> net exports (X-M)
Term
expenditures formula
Definition
GDP = C + I + G + (X-M)
Term
nominal values
Definition
values measured in terms of current prices; do not hold the prices of goods and services constant
Term
real values
Definition
values measured in terms of constant prices; eliminate the effects of changes in the price level
Term
GDP or GNP deflator
Definition
represents all goods and services produced in the economy
Term
Consumer Price Index (CPI)
Definition
represents what the typical family of four will purchase
Term
substitution bias
Definition
over time consumers will shift out of the goods whose prices have risen relatively rapidly, thus changing the composition of the bundle; the "cost of living" will be overstated
Term
quality bias
Definition
failure to adjust prices to reflect increases in quality will again overstate the "cost of living"
Term
problem with real per capita GDP as a measure of social welfare
Definition
non-market activities, unreported market activities, externalities, differences in leisure, differences in quality not reflect by price, gdp measures production not the increase in goods and services available for consumption
Term
components of consumption
Definition
services, goods
Term
disposition of income (without government)
Definition
income = consumption + saving
Term
disposition of income (with government)
Definition
income = consumption + saving + taxes
Term
saving
Definition
deferred consumption
Term
keynesian concumption function (without government)
Definition
Ct = A + B*Ydt
Term
keynesian concumption function (with government)
Definition
Ct = A + B*Ydt
Term
keynesian concumption function
Definition
disposable income, consumption, aggregate income
Term
permanent income hypoethesis theorist
Definition
milton friedman
Term
permanent income hypothesis
Definition
consumption is a function of long run or permanet income, not current income
Term
gross investment
Definition
production of capital goods + changes in inventory
Term
net investment
Definition
changes in stock of capital goods + changes in inventory
Term
mercantilism
Definition
exports are good and imports are bad
Term
unemployment rate
Definition
unemployed divided by civilian labor force
Term
unemployed
Definition
do not havea  job, be available for work. looking for working within past 4 weeks
Term
frictional unemployment
Definition
the unemployment that results because workers typically spend some time looking for work between jobs; workers are unaware of positions that are/will be available
Term
structural unemployment
Definition
results because jobs and workers are not perfectly matched; different people have different skills and different jobs have different requirements
Term
cyclical unemployment
Definition
reuslts from a downturn in economic activity (recession or depression)
Term
problem with measuring unemployment
Definition
some who work are not counted as being employed
Term
problem with measuring unemployment
Definition
discouraged workers not considered unemployed
Term
problem with measuring unemployment
Definition
no distinction made between full and part time employment
Term
problem with measuring unemployment
Definition
some workers are classified as unemployed en though they are not seriously looking for work
Term
rule of 72
Definition
divid 72 by the growht rate and thiswill tell you how many years it will take to double
Term
growth from an inefficient level of production
Definition
Term
growth from an efficient level of production
Definition
Term
causes of economic growth
Definition
increase in resources (natural resources, labor, capital)
Term
causes of economic growth
Definition
technological advances
Term
causes of economic growth
Definition
reduction in trade barriers (more free trade)
Term
causes of economic growth
Definition
structure of property rights
Term
demand-side policies
Definition
Term
absolute economic growth
Definition
Term
per capita economic growth
Definition
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