Term
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Definition
| is the domestic product demanded by households, firms, governments and the rest of the world, at each given price level in an economy during a given time period |
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Term
| when aggregate demand increases |
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Definition
| inflation and jobs increase |
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Term
| when aggregate demand decreases |
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Definition
| the price level falls and jobs decrease |
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Term
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Definition
| is the domestic product produced by firms at each given price level in an economy during a given time period |
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Term
| when aggregate supply decreases |
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Definition
| an adverse supply shock-->inflation and unemployment increases |
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Term
| potential GDP growth formula |
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Definition
| growth rate(t+1)=growth rate in labor hours(t+1)+growth rate of labor productivity(t+1) |
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Term
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Definition
1)is the total spending on final goods and services
2) AE=C+I+G+(X-M) |
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Term
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Definition
| 1) line shows the points for which consumption and disposable income are identical |
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Term
| left of the 45 degree line intersection with consumption |
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Definition
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Term
| right of the 45 degree line intersection with consumption |
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Definition
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Term
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Definition
| {[RealGDP(t+1)-RealGDP(t)]/[RealGDP(t)]}*100 |
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Term
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Definition
1) sustainable increase in productive capacity
2) results from an increase in AS, and commonly we see a corresponding increase in AD due to new income and expectation changes |
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Term
| the law of diminishing returns (GDP) |
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Definition
| the more labor input is increases, eventually increases to real GDP are smaller |
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Term
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Definition
| GDP depends upon the amount of labor input employed in the production prcoess |
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Term
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Definition
| wage adjusted according to inflation |
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Term
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Definition
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Term
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Definition
| 1) developing countries living standards will catch up with developed countries' via higher growth rates |
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Term
| year of 70 convergence formula |
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Definition
| # years = 70/growth rate (in%) |
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Term
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Definition
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Term
| neoclassical growth theory |
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Definition
1) drives living standards
2) growth due to technological change is
economic growth rate per hr--(1/3x capital growth per labor hr)
3) faster technological change, the faster standard of living improves |
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Term
| better technological change |
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Definition
1) more education
2) more capital formation
3) more basic research and development |
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Term
| induced consumption (MPC*DA) |
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Definition
| the economies of the MPC is that disposable induces spending |
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Term
| marginal propensity to consume (MPC) |
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Definition
1) the ratio in consumption to the change in disposable income
2) MPC=(c2-c1)/(d2-d1)
3) constant |
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Term
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Definition
| 1) is the difference between GDP(Y) and net taxes (T), and accounting for transfer payments |
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Term
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Definition
DI=GDP-(taxes-transfer payments)
DI=Y-T |
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Term
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Definition
| new capital replaces old capital and generates an investment boom |
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Term
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Definition
S=DI-C
negative is dissavings |
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Term
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Definition
Marginal propensity to save
2) MPC+MPS=1
for every dollar x goes to savings |
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Term
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Definition
1) 3rd largest spender in the US economy at appx 19%
2) purchases: health care, defense, roads, edu, etc |
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Term
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Definition
are grants of money from the government without expectation for tasks or products
ex: social security |
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Term
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Definition
| are goods and services produced domestically and purchased by foreigners |
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Term
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Definition
1) NX=X-M
2) x is exports
3) m is imports |
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Term
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Definition
| are goods produced in a foreign economy and purchased domestically |
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Term
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Definition
| 1) is a deduction from corporate profit income, but is not an actual cash deduction |
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Term
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Definition
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Term
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Definition
| national income+depreciation+discrepancy = GNP |
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Term
| which is more volatile investment or consumption? |
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Definition
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Term
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Definition
| a price index for the entire economy |
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Term
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Definition
| =[(nominal GDP)/(real GDP)]*100 |
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Term
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Definition
| current quantities at current prices |
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Term
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Definition
| current quantities at reference prices |
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Term
| labor productivity equals |
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Definition
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Term
| growth rate of labor hours equals |
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Definition
[(LH2-LH1)/(LH1)]*100
where LH is labor hours (current and previous) |
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Term
| long run growth rat equals |
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Definition
| (labor productivity growth)+(growth rate of labor hours) |
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Term
| long run growth rat eequals |
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Definition
| (labor productivity growth)+(growth rate of labor hours) |
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Term
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Definition
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Term
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Definition
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Term
| who releases CPI information |
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Definition
| Bureau of Labor Statistics |
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Term
| where are prices collected |
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Definition
1) 87 metropolitan area
2) 23,000 stores
3) 50,000 landlords |
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Term
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Definition
| CPI less food and energy prices |
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Term
| macroeconomic equilibrium |
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Definition
| aggregate demand equals aggregate supply |
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Term
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Definition
1) one factor affecting spending
2) a source of purchasing power in addition to income
3) wealth is everything you own, all of your assets--different than income |
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Term
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Definition
| a nominal variable used to adjust other nominal variables into real variables |
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Term
| is aggregate demand a schedule or a fixed number? |
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Definition
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Term
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Definition
| the amount that firms spend on factories, machinery, software and such, plus the amount new families spend on new households |
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Term
| another name for potential GDP |
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Definition
| natural gross domestic product |
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Term
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Definition
| measures the purchases of final goods and services by households, firms, governments, and the rest of the world |
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Term
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Definition
| standard of living, and is correlated with higher real wage rates |
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Term
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Definition
| a measure of output form a production process, per unit of input |
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Term
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Definition
| businesses are getting more efficient, getting more value from each hour of labor. however, companies needs less workers thus people are left unemployed |
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Term
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Definition
| "a" is the level of household spending independent of disposable income |
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Term
| expected real interest rate equals |
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Definition
| (nominal interest rate)-(expected inflation rate) |
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Term
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Definition
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Term
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Definition
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Term
| the pillars of economic growth |
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Definition
1) labor
2) capital
3) technology |
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Term
| capital formation is encouraged by... |
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Definition
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