Econ 102

the study of how individuals and how firms make decisions and how they interact in markets

the study of economy-wide phenomena, incl. inflation, unemployment, and economic growth

Gross domestic product: measures total income of a nation, the market value of all final goods and services produced within a country in a given period of time

• Y=GDP
• C=consumption
• I=investment
• G=government purchases
• NX=net exports

spending by households on goods and services, w/ exception of purchases of new housing

spending in capital-equipment, inventories, and structures including household spending on new housing

spending on goods and services by local, territorial, provincial, and federal govts

the value of a nation's exports minus the value of its imports, aka trade balance

a measure of the price level, ratio of nominal GDP to real GDP times 100

Consumer price index: the overall measure of the cost of the goods and services bought by a typical consumer

CPI=(price of basket of goods/services in current year)/(price of basket in base year) x 100

= (CPI in year 2-CPI in year 1)/(CPI in year 1)x100

Transportation (19.3%)

the automatic correction of a dollar amount for the effects of inflation by law or contract

cost-of-living-adjustment, automatically raises the wage when the CPI rises

the interest rate that is usually reported without a correction for the effects of inflation

the interest rate that is corrected for the effects of inflation

real interest rate=nominal interest rate - inflation rate

the quantity of goods and services produced from each hour of a worker's time

• physical capital per worker
• human capital per worker
• natural resources
• technological knowledge

the stock of equipment and structures that are used to produce goods and services

the knowledge and skills that workers acquire through education, training, and experience

the inputs into the production of goods and services that are produced by nature, such as land, rivers, mineral deposits

society's understanding of the best ways to produce goods and services

the benefit from an extra unit of input declines as the quantity of the input increases

countries that start off poor tend to grow more rapidly than countries that start off rich

a capital investment that is owned and operated by a foreign entity

an investment that is financed with foreign money operated by domestic residents

an investment that is financed with foreign money but operated by domestic residents

the effect of one person's actions on the well-being of a bystander

the immigration of many of the most highly educated workers to rich countries, where they can enjoy a higher standard of living

the ability of people to exercise authority over the resources they own

the group of institutions in the economy that help to match one person's savings with another person's investment

• Financial Markets
• Financial intermediaries

In financial markets savers know who they are lending their money too, in financial intermediaries savers don't know who their money is being lent to

a certificate of indebtedness that specifies the obligation of the borrower to the holder of the bond

the sale of a bond to raise money

dollar amount the borrower will pay back sometime in the future

borrower will pay an interest rate every year to the lender for the length of the bond

bonds that mature in less than 2 years, no coupon rate, the difference b/w what you pay for the bond and the par value acts as the interest

agencies that look at each bond and assign them a grade

represents ownership in a firm, and is, therefore, a claim to its profits

the sale of a stock to raise money

the average of a group of stock prices, ex. the Dow Jones Industrial Average, the S&P/TSX Composite Average

financial institutions through which savers can indirectly provide funds to borrowers

Primary function-take deposits from savers and use these deposits to make loans to people who want to borrow

institution that sells shares to the public and uses proceeds to buy a portfolio of stocks and bonds

refers to how various numbers are defined and added up

0

(S), the total income in the economy that remains after paying for consumption and gov't purchases

income that households have left after paying for taxes and consumption

tax revenue that the gov't has left after paying for its spending

the market in which those who want to save supply funds and those who want to borrow to invest demand funds

the sum of past budget deficits and surpluses

a decrease in investment that results from government borrowing

the amount of unemployment the economy normally experiences

the year-to-year fluctuations in unemployment around the natural rate

Labour force survey

the total number of workers, including both the employed and the unemployed

LF=number of employed+number of unemployed

percentage of the labour force that is unemployed

U=(#of unemployed)/(LF) x 100

Labour force percentage rate: percentage of the adult population that is in the labour force

= (LF)/(Adult population) x 100

individuals who would like the work but have given up looking for a job