Macro Econ Test 2

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Author:
nazario.a
ID:
1479
Filename:
Macro Econ Test 2
Updated:
2009-11-24 12:36:30
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Macro Economics
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This is for Econ 1A Second test
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  1. In (Net Investment)
    (In) Net Investment = (Ig) Gross investment - Depreciation
  2. Xn
    (Xn) Net Exports = (Xg) Exports - (M) Imports
  3. Monetary Measure
    Idea that all goods and services are boiled down to a monetary value
  4. GDP Exclusion
    • GDP Excludes non production transactions
      Public transfer payments - social security, wealth-fare, veterans
      • Private transfer payments - gifts
      • Stock market transactions - buying or selling of stokes bond
      • Second hand sales
  5. Types of goods and multiple counting
    There are many stages of goods. RAW goods, intermediate goods, finished goods. In order to avoid multiple counting finished goods are the only ones counted in GDP
  6. Define GDP
    • Gross Domestic Product - Measures total output of finished goods over a given period within a given countries borders.
    • Measures:
      • Finished goods
      • Produced within a country
      • For a set period of time
  7. Calculating GDP : Expenditure or Output Approach
    • GDP = C + Ig + G+ Xn
    • + (C) Consumption by households
    • + (Ig) Investments expenditures by business
    • + (G) Government purchases of goods and services
    • + (Xn) Expenditures by foreigners
  8. Calculating GDP : Income or Allocations approach
    • GDP =
    • //START NI
    • + Wages (income earned by population)
    • + Rents (income earned by landlords)
    • + Interest (Interest earned by banks and business providing loans. Also includes interest earned on accounts)
    • + Proprietors Income (Income owned by sole-proprieterships owners)
    • + Corporate Profits ( Income earned by big business)
    • + Tax on Imports Exports
    • + Statistical Adjustment
    • //END NI

    • - NFFI (Net foreign Factor Income)
    • + Consumption of fixed income (depreciation)
  9. National Income
    • Income earned by the people of a nation domestic or foreign. As opposed to domestic income
    • + Wages (income earned by population)
    • + Rents (income earned by landlords)
    • + Interest (Interest earned by banks and business providing loans. Also includes interest earned on accounts)
    • + Proprietors Income (Income owned by sole-proprieterships owners)
    • + Corporate Profits ( Income earned by big business)
    • + Tax on Imports Exports
    • + Statistical Adjustment
  10. Define NFFI (Net Foreign Factor Income)
    • The difference between money received by foreign workers domestically and money received from domestic workers foreignly.
    • NFFI is subtracted from GDP but added in GNP.
  11. Calculate NDP (Net Domestic Product)
    NDP = GDP - Depreciation (consumption of fixed capital)
  12. NI (National Income)
    NI = NDP - Statistical Discrepancy + NFFI
  13. Disposable Income
    • DI = GDP - Taxes - G
    • or
    • DI = Consumption + Savings
  14. PI (Personal Income)
    • National Income
    • - Taxes
    • - Social Security
    • - Corporate Income tax
    • - Undistributed corporate profits
    • + Transfer payments
  15. APC
    Average propensity to consume relative to income
  16. APS
    Average propensity to save relative to income
  17. MPC
    Marginal propensity to consume relative to income
  18. MPS
    Marginal propensity to save relative to income
  19. Calculate Unemployment Rate
    Unemployment / Size of Labor Force
  20. Calculate size of Labor force
    Employed + Unemployed
  21. Calculate Not in the Labor Force
    Size of Labor Force = Total population - 16 or Institutionalized
  22. Define Okun's Law
    Okun's law suggests a GDP gap of 2% for every 1% that the unemployment rate exceeds its natural rate.
    GDP Gap = ((Current Unemployment - Natural Unemployment) * 2)
  23. Calculate Okun's Law
    Okun's Law is GDP GAP due to unemployment

    GDP Gap = ((Current Unemployment - Natural Unemployment) * 2)
  24. Using Okun's Law Calculate lost GDP
    Potential GDP * GDP Gap = Lost GDP
  25. Calculate Rate of Inflation
    (Current Year - Base Year) / Base Year
  26. Rule of 70
    The amount of time it takes to double an amount at a given rate
    70 / Rate
  27. Calculate GDP Growth
    [(Current Year - Base Year)/Base Year] * 100
  28. Calculate Per Capita GDP
    (Current Real GDP / Current Population)

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