Econ 102

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hcunning
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294214
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Econ 102
Updated:
2015-02-05 12:00:12
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macroeconomics
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macroeconomics
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econ 102 flashcards
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  1. Microeconomics
    the study of how individuals and how firms make decisions and how they interact in markets
  2. Macroeconomics
    the study of economy-wide phenomena, incl. inflation, unemployment, and economic growth
  3. GDP
    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
  4. Y = C + I + G + NX
    • Y=GDP
    • C=consumption
    • I=investment
    • G=government purchases
    • NX=net exports
  5. Consumption
    spending by households on goods and services, w/ exception of purchases of new housing
  6. Investment
    spending in capital-equipment, inventories, and structures including household spending on new housing
  7. Government Purchases
    spending on goods and services by local, territorial, provincial, and federal govts
  8. Net exports
    the value of a nation's exports minus the value of its imports, aka trade balance
  9. GDP deflator
    a measure of the price level, ratio of nominal GDP to real GDP times 100
  10. GDP deflator eqn
  11. CPI
    Consumer price index: the overall measure of the cost of the goods and services bought by a typical consumer
  12. CPI eqn
    CPI=(price of basket of goods/services in current year)/(price of basket in base year) x 100
  13. Inflation in year 2 equation
    = (CPI in year 2-CPI in year 1)/(CPI in year 1)x100
  14. Largest percentage of the CPI basket goes to ________
    Transportation (19.3%)
  15. Indexation
    the automatic correction of a dollar amount for the effects of inflation by law or contract
  16. COLA
    cost-of-living-adjustment, automatically raises the wage when the CPI rises
  17. Nominal interest rate
    the interest rate that is usually reported without a correction for the effects of inflation
  18. real interest rate
    the interest rate that is corrected for the effects of inflation
  19. calculate real interest rate:
    real interest rate=nominal interest rate - inflation rate
  20. Productivity
    the quantity of goods and services produced from each hour of a worker's time
  21. How productivity is determined
    • physical capital per worker
    • human capital per worker
    • natural resources
    • technological knowledge
  22. Physical capital
    the stock of equipment and structures that are used to produce goods and services
  23. human capital
    the knowledge and skills that workers acquire through education, training, and experience
  24. natural resources
    the inputs into the production of goods and services that are produced by nature, such as land, rivers, mineral deposits
  25. technological knowledge
    society's understanding of the best ways to produce goods and services
  26. Deminishing returns
    the benefit from an extra unit of input declines as the quantity of the input increases
  27. Catch-up effect
    countries that start off poor tend to grow more rapidly than countries that start off rich
  28. Foreign direct investment
    a capital investment that is owned and operated by a foreign entity
  29. Foreign indirect investment
    an investment that is financed with foreign money operated by domestic residents
  30. Foreign portfolio investment
    an investment that is financed with foreign money but operated by domestic residents
  31. Externalities
    the effect of one person's actions on the well-being of a bystander
  32. Brain drain
    the immigration of many of the most highly educated workers to rich countries, where they can enjoy a higher standard of living
  33. Property rights
    the ability of people to exercise authority over the resources they own
  34. Financial System
    the group of institutions in the economy that help to match one person's savings with another person's investment
  35. Two groups of financial systems
    • Financial Markets
    • Financial intermediaries
  36. Difference between the two groups of financial systems?
    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
  37. Bond
    a certificate of indebtedness that specifies the obligation of the borrower to the holder of the bond
  38. debt finance
    the sale of a bond to raise money
  39. Par value
    dollar amount the borrower will pay back sometime in the future
  40. Coupon rate
    borrower will pay an interest rate every year to the lender for the length of the bond
  41. Treasurer bills
    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
  42. Bond-grading agencies
    agencies that look at each bond and assign them a grade
  43. stock
    represents ownership in a firm, and is, therefore, a claim to its profits
  44. equity finance
    the sale of a stock to raise money
  45. Stock index
    the average of a group of stock prices, ex. the Dow Jones Industrial Average, the S&P/TSX Composite Average
  46. Financial Intermediaries
    financial institutions through which savers can indirectly provide funds to borrowers
  47. Bank
    Primary function-take deposits from savers and use these deposits to make loans to people who want to borrow
  48. Mutual funds
    institution that sells shares to the public and uses proceeds to buy a portfolio of stocks and bonds
  49. Accounting
    refers to how various numbers are defined and added up
  50. In a closed economy, NX=_____
    0
  51. National Saving
    (S), the total income in the economy that remains after paying for consumption and gov't purchases
  52. Private saving
    income that households have left after paying for taxes and consumption
  53. Public saving
    tax revenue that the gov't has left after paying for its spending
  54. Market for Loanable Funds
    the market in which those who want to save supply funds and those who want to borrow to invest demand funds
  55. Gov't debt
    the sum of past budget deficits and surpluses
  56. Crowding out
    a decrease in investment that results from government borrowing
  57. Natural rate of unemployment
    the amount of unemployment the economy normally experiences
  58. Cyclical unemployment
    the year-to-year fluctuations in unemployment around the natural rate
  59. LFS
    Labour force survey
  60. Labour force
    the total number of workers, including both the employed and the unemployed
  61. LF eqn
    LF=number of employed+number of unemployed
  62. Unemployment rate
    percentage of the labour force that is unemployed
  63. Unemployment rate eqn
    U=(#of unemployed)/(LF) x 100
  64. LFPR
    Labour force percentage rate: percentage of the adult population that is in the labour force
  65. LFPR eqn
    = (LF)/(Adult population) x 100
  66. Discouraged searchers
    individuals who would like the work but have given up looking for a job

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