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  1. Free Market Philosophy
    People Are Free To Choose How To Direct Their Own Lives
  2. What does capitalism promote?
    Promotes Entrepreneurship
  3. National Income Accounting
  4. GDP
    Calculated $ amount of all total goods & services produced within US Borders
  5. Who controls the GDP data?
    US Bureau of Economic Analysis
  6. What is GNP
    Gross National Product

    This is the market value of all goods and services produced by U.S. citizens both here and abroad.
  7. What are two factors that influence Net Exports/Imports?
    • Balance of Trade Report
    • U.S. Import / Export Bank
  8. Final Goods:
    Are goods/services that are produced for final use or consumption.
  9. Intermediate Goods:
    Are goods/services that are purchased in order to help produce the final good or service.
  10. Are Intermediate goods counted as part of the final GDP?
    • NO!
    • Because the value of final goods includes the value of all intermediate goods. (want to avoid double counting or inflating the GDP result)
  11. What "Financial Transactions" are EXCLUDED from the GDP? (4)

    • Public Transfer Payments
    • Private Transfer Payments
    • Stock (and Bond) Market Transactions

    Second Hand Sales (ex used car)

    WHY? Because these transactions don't really add to the real GDP.
  12. What are the two approaches to GDP?
    Expenditure & Income Approach
  13. Gross Investment
    Net Investments
  14. Gross Investment
    + Depreciation
    Gross Investments
  15. Which is the most common method used in calculatng GDP?
  16. Real GDP
    is a measure of actual production that takes out inflation.
  17. •The Nominal GDP
    is a defective measure because it doesn’t discount inflation.
  18. What are some other OBV shortcomings of the GDP?
    • •The
    • Increased Standard
    • of Living and
    • Improved Product Quality Is Not Measured

    • •The Underground
    • Economy Not
    • Counted

    • •Changes
    • To The Environment Is
    • Not Counted (e.g. Pollution)

    • •Other
    • Non-economic
    • sources of Well-Being
    • Not Measured (e.g. more leisure time, less crime and better schools.)
  19. Government spending that is financed by borrowing is often referred to as?
    Defeceit Spending
  20. What 4 areas of Federal Expenditures stand out?
    • 1. Pension & Income Security
    • 2. National Defense
    • 3. Health
    • 4. Interest on Public Debt
  21. A marginal tax rate is
    the rate at which tax is paid on each additional unit of taxable income.

    • Ex: 80K
    • 1-16,750   =          10%
    • 16,751 - 68,000     15%
    • 68,000 - 137,000   25%
  22. tHE AVERAGE TOTAL tax rate is
    Total tax paid divided by total taxable income.
  23. Payroll Taxes
    • Taxes that go towards two Federal Programs
    • Social Security & Medicare
  24. Corporate Income Tax
    Levied on a corporations profit

    the difference between its total revenue and it total expenses.
  25. Sales and excise tax
    Taxes on commodities or on purchases

  26. Property Taxes
    Local gov get 71% from this!
  27. Benefits -received principle
    of taxation asserts that households should purchase the goods and services of government in the same way they buy other commodities.
  28. Abiliy to pay principle
    of taxation states that the tax burden should be spilt up according to income and wealth.
  29. Progressive =
    REgressive =
    Proportional =
    • Pro = More $ = more taxes
    • Reg = Less$ = Less Taxes
    • Proportional = flat taxes/flat rate
  30. Corporate tax rate is a proportional tax rate at ____%
  31. Phases of business cycle
    • Peak: Temporary Maximum
    • Recession: Decline in total output & employment
    • Trough:Output & Employment Bottom out
    • Expansion: Real GDP, Income, Employment Rises.
  32. Real GDP Per Capita
    • Real GDP Divided by
    • Total Population
  33. The Rule of 70
    Approx # of years to double REAL GDP

    •           70
    • =_________________
    •    Annual % Growth
  34. What are two main sources of economic growth?
    • Workers ability to increase production
    • Personal motivation / Work Ethic

    Also.... Land, labor, capital, Entper
  35. Economic Indicators:
    • Leading Indicators – These tell us what to expect in the
    • future.

    • Coincident Indicators – These tell us what is happening now in
    • the economy.

    • Lagging Indicators – These usually are the last to change as
    • the economic cycle progresses
  36. Discouraged Worker
    Marginal workers who have not been able to find work for 12 months and are excluded from the official unemployment statistics.
  37. Real Unemployment
  38. Participation Rate
    Measures those who have jobs or are seeking jobs.
  39. What makes up the "Labor Force"
    Employed + Unemployed
  40. What makes up the "Total Population"
    Employed + Unemployed + Under 16/Prison + Not in Labor Force
  41. Types of unemployment
    • Frictional Unemployment:
    • These R ambitious workers who have good talents & R simply seeking better jobs.
    • Structural U:
    • These workers have skills that are no longer in demand and they haven’t been trained or educated themselves with new skills 
    • Cyclical U:
    • This is unemployment that is a
    • result of the decline of the business cycle or the start of a recession
  42. Full employment occurs when
    • when
    • the number of job seekers = job openings
  43. What is GDP Gap?
    Difference between actual GDP and the potential GDP.
  44. Okuns % of potential GDP.
    States that for every 1% of UE that exists over the natural rate of full-employment rate....... there will be a loss of 2
  45. What are some noneconomic costs of UE?
    • Loss in self-esteem
    • Increase in drugs, alcohol, crime, suicides
    • Family breakups & DIvorce
  46. Define Inflation

    How do we measure inflation in US?
    • Inflation:
    • is the rise of the general price level. Inflation reduces the purchasing power of the dollar. 

    Measure by using Consumer Price Index (CPI)

    • CPI = Price recent Market Basket -Last Yr
    •          __________________________ X 100
    •                Last Yr Market Basket
  47. Core Inflation:
    Excludes volatile food & energy prices
  48. Types of inflation:
    Gen Rule: Money

    Supply Growth > GDP = INFLATION
    Demand Pull Inflation:price levels rise because of an imbalance in the aggregate supply and demand. When the aggregate demand in an economy strongly outweighs the aggregate supply, prices increase.

    Cost-Push Inflation: develops because the higher costs of production factors decreases in aggregate supply (the amount of total production) in the economy. Because there are fewer goods being produced (supply weakens) and demand for these goods remains consistent, the prices of finished goods increase.
  49. Inflationary Expectations
    • Anticipated Inflation:
    • –Nominal Interest Rate
    • –Real Interest Rate
    • –Inflation Premium

    • Unanticipated Inflation:
    • Inflation that catches people by surprise.
Card Set:
16 24 26
2014-03-13 02:28:53

macro econ
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