Private transfer payments. (Such as: Gifts to kids.)
Stock Market Transactions
Second-hand sales (Goodwill)
Goods already counted. (Used cars, etc.)
What are two ways to look at G.D.P. to calculate it?
What is the spending/expenditures (output) approach?
GDP viewed as the sum of all the money spent buying into it.
Consumption + government + gross investment + net exports
GDP + (C+G+Ig+Xn)
Consumption: Personal consumption of households for goods/services comprised:
10% on durabel goods
30% on non-durable goods
60% on services
Government: Govt's expenditures for schools, highways, (I.E. publiv owned capital)
Gross Investments: (Ig) Gross Private Domestic Investment: Final purchases of business capital goods, all construction, changes in business inventions. (I.E. So, gross investment is all final priced capital goods.)
Net Exports: (Xn) = Exports - imports (In recent years, imports > exports, so a negative figure.)
What is the income/allocations (earnings) approach?
Income derived or created from producing it.
Wages and Salaries: payment by the hour or salary (work)
Rents: Recvd by the households and firms
Interest: On savings, household, and firms
Proprieters Income: Owners of small businesses and retained earnings of corporations
C.P.I. - Consumer Price Index
Price Index = $Price of market basket in year
$Price of market basket in base year
(Underground economy = .08% of GDP)
USA is a _________ economy.
Increase in the GDP (Gross Domestic Product) from one year to the next year.
(GDP growth lessens burden of scarcity.)
Rule of 70
Number of years for $dollars to double given n annual %percentage increase.
Real GDP Growth
An increase in Gross Domestic Product occuring over some time period.
In USA, has risen 32% on average since 1950
Real GDP per capita
And increase in Real GDP per capita occuring over some time period.
Has grown 2% since 1950.
Sustained growth is _________ .
Stable growth in the economy with full employment.
Did not happen until the past 2 centuries.
Modern growth is _________ .
In Real GDP - Characterized by institutional structures that encourage savings and development of new technologies.
Strong property rights, patents, effecient financial institutions and a competitive markert system has helped growth.
Some countries richer due to their being in the modern economic cycle.
To continue growth, rich countries must invest and use new technologies.
Poor nations can grow faster as they use cutting edge technologies by the rich countries.
4 determinants of economic growth
Changes in quantity and quality of natural resources.
Changes in human resources.
Change in stock of capital goods.
Improvements in technology and increase in deman will cause increase in total spending.
What are Business Cycles?
Alternating rises and declines in level of economic activity.
Reasons for Business Shocks
Production changes - due to resource and technology changes.
Monetary factors (too much or too few $$$)
Political events - wars, elections, financial bubbles (overlending money)
US unemployment population in 3 groups...
Group one: 16 y/o's and people who are institutionalized (not a part of the work force)
Group two: Adults who are potential workers, but not employed and not seeking work.
Group three: the labor force - adults who are able and willing to work. (ex: employed and are seeking work)
How is the unemployment rate figured?
Unemployed x 110% divided by the Labor Force
Types of Unemployment include _______ .
Structural: anytime job skills change - required training needed, more long-term.
Cyclical: caused by a recession - affects all types of jobs, most serious.
Frictional: by choice, people not working (between jobs/not looking,) continuing education, or quit their job for various reasons.
Occurs when the economy experiencing only frictional and structural unemployment.
For every 1% which the natural rate of unemployment exceeds the cyclical rate.
GDP declines by 2%
Workers in lower skilled jobs usually have higher rates of unemployment.
Demand Pull Inflation
Excess demand pulls up prices of limited output.
Cost Push Inflation
Through output and employment declining - pricing rising reasons (Ex: supply shocks: oil - usually short lived)