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- the total number of workers, both employed and unemployed
- labor force = number of employed + number of unemployed
Economic growth is a term used to indicate the increase of per capita gross domestic product (GDP) or other measure of aggregate income. It is often measured as the rate of change in GDP. Economic growth refers only to the quantity of goods and services produced
- those who are not employed, though available to work and tried to find employment during the last 4 weeks. include those laid off waiting to be recalled
- unemployment rate = number of unemployed / labor force x 100
the production of goods and services valued at constant prices. Real GDP uses constant base-year prices to place a value on he econconomies production of goods and services.
- an increase in the overall level prices in the economy
- inflation rate in year 2 = GDP deflator in year 2 - GDP deflator in year 1 / GDP deflator in year 1 x 100
measure of the cost of a basket of goods and services bought by firms
- a measure of the price level calculated as the ratio of nominal GDP to real GDP times 100
- GDP deflator = Nominal GDP / Real GDP x 100
- Cost of Living Allowance
- Partial or complete indexation of wage to consumer price index
- automaticly raises when Consumer Price Index (CPI) Raises
- "too much money chasing too few goods"
- "too much money spent chasing too few goods"
- Consumer Price index
- price of basket of goods and services in current year / price of basket in base year x 100
- overall cost of goods and services bought by a typical consumer
cost punch inflation
inflation caused by substantial increases in the cost of important goods or services where no suitable alternative is available
why banks keep minimum reserve
- Excess reserves are held so that banks are confident that they will not run short on cash
- Reserve requirements regulate the minimun amount of reserves banks much hold against deposits.Reserve requirements influence how much money the banking system can create with each dollar of reserves
- Reserve Ratio
- the fraction of deposites that banks hold as reserves
Uses of Monetary Policy
- Monetary Policy The setting of he money supply by policymakers in the central bank
- Used to control the amount of money that is made available in the economy, or the Money Supply
the amount of income left after you have paid your taxes
When Fed Raises the RR Ratio
- Excess reserves
- held so that banks are confident that they will not run short on cash
unemployment resulted because the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one.
unemployment that results because it takes time for workers to search for the jobs that best suit thier tastes and skills
does inflation act as a mechanism of redistribution?
- Unanticipated inflation, inflation that is not expected, will redistribute income and wealth
- Anticipated inflation, inflation that is expected, results in a much smaller redistribution of income and wealth
- The Market Value of all final goods and services produced within a country in a given period of time.
- y = c + i + g + nx
- Gross Domestic Product = Consumption + Investment + Government Purchases + Net Exports (exports - imports)
Real Interest Rate
- Real Interest Rate = Nominal Intrest Rate - Inflation Rate
- interest rate corrected for the effects of inflation
- Liquidity the ease with which an asset can be converted into the economy's medium of exchange
- Liquidity risk The risk that arises from the difficulty of selling an asset