Week 2 Lecture

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regishouse
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232186
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Week 2 Lecture
Updated:
2013-08-31 18:59:28
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ECO 327
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ECO Lecture Week 2
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  1. Circular Flow of Money in a Market Economy
  2. Gross Domestic Product (GDP)
    The market value of all final goods and services produced within a country in a given year
  3. Components of GDP (The Expenditure Model)
    • GDP = C+I+G+(X-M)
    • C= consumption (spending by households)
    • I= Investment (spending by business + households purchases of new homes)
    • G= Government Purchases (spending by local, state, and federal governments)
    • (X-M)= Exports (X) of domestically produced goods and services to foreigner - imports (M) of foreign goods and services (X-M) is called "Net Exports" 
  4. Nominal GDP
    Production of goods and services valued at current prices
  5. Real GDP
    Production of goods and services valued at constant base-year prices
  6. Base Year
    Year for which GDP deflator is set to an index of 100
  7. GDP Deflator
    GDP Deflator Nominal GDP 100 ÷ Real GDP
  8. Who Measures GDP
    Estimated quarterly by the U.S. Dept of Commence, Bureau of Economic Analysis
  9. Economic Growth
    • Factors:
    • Population
    • Productivity
  10. Population
    increases at a rate of about 2% to 2.5% per year
  11. Productivity
    increases at a rate of about 1% per year (increases in technology largely responsible for increases)
  12. Secular Growth Trend
    Line that tilts slightly upward indicating the 3% to 3.5% annual growth rate
  13. Effects of Population Growth
    • 1. Stretching natural resources (Thomas Robert Malthus)
    • 2. Diluting the capital stock
    • 3. Trying to force technological progress beyond capability
  14. Determinants of Productivity
    • 1. Increasing physical capital
    • 2. Advancing human capital
    • 3. Applying natural resources
    • 4. Advancing technology
  15. Business Cycles
    • Has been subject to business cycles for as long as the GDP has been measured
    • Initiated by natural disasters or acts of war between nations
    • Based on optimism or pessimism of consumers and investors 
  16. Phases of the Business Cycle
  17. U.S. Labor Force
    • Included: measures are based on the civilian non-institutional population 16 yrs or older
    • Excluded: ppl under 16, ppl confined to institutions such as nursing homes and prisons, ppl in active duty, ppl not seeking work or able to work
  18. Unemployement
    • Frictinal
    • Structural
    • Cyclical

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