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29 Cards in this Set
- Front
- Back
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What is economic growth?
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= An increase in real GDP (per capita) ocurring over some time period
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Ral GDP per capita
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(Real GDP)/(Size of population)
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How does economic growth relaz society's constraints on production?
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An economy that is experiencing economic growth lessens the burden of scarcity (better able to meet people's wants and socioeconmic needs).
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The rule of 70 (Approximate # of yrs required to double real GDP)
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(70)/ (annual percentage of growth [in percentage form])
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2 Fundamental Ways Society Can Increase its Real Output and Income
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(1) Increase its inputs of resources (land, labor, capital, entrepreneurial)
(2) Increase the productivity of those inputs |
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What is the 'the rule of 70'?
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The approximate # of yrs required to double real GDP
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What is productivity?
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A measure of average (real) output.
Eg. Productivity of labor = (Real Output)/(Hours of Work) |
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3 Understatements of Gain in Economic Well-Being (Things Unaccounted for in Calculating Real GDP every year)
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(1) Improved Goods and Services (i.e iceboxes => fridges)
(2) Added leisure (50 hrs of work-week => 35 hrs) (3) Other impacts of growth (Effects of Stressful work environment, greater human security, etc. on workers and society) |
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4 Phases of Business Cycle (Time on X-axis, Level of Real Output on Y-axis)
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(1) Peak
(2) Recession (3) Trough (4) Recovery |
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Attributes of 'Peak'
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(1) Economy near Full Employment
(2) Level of Real output near economy's capacity (3) Price level likely to rise |
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Attributes of 'Recession'
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(1) Decline in Total Output, Employment, and Trade
(2) Little Business Activity (3) Price level falls if recession ocurrs for lond period of time |
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Attributes of 'Trough'
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(1) Output and Employment at lowest levels
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Attributes of 'Recovery'
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(1) Output and Employment Rising
(2) Price-level begins to rise as well |
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During recession, what happens to some industries?
- Capital goods = housing, heavy equipment, etc. - Consumer durables = cars, personal computers, fridges, etc.) |
During recession, industries that produce capital goods and consumer durables suffer greater output and employment declines than do service and nondurable consumer goods industries.
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3 groups of unemployment
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(1) Under 16 and/or institutionalized
(2) Not in labor force (Could work but are not and not actively seeking it) (3) Employed |
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Unemployment Rate
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[ (Unemployed)/ (Labor Force) ] x 100
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2 Understatements of Unemployment Rate
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(1) Part-Time employment = fully employed
(2) Discouraged workers (unsuccessful at getting jobs too many times before) = Not in Labor Force |
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3 Types of Unemployment
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(1) Frictional
(2) Structural (3) Cyclical |
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What is Frictional Unemployment?
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* search/wait unemployment
* workers searching for jobs or waiting to take jobs in near future * friction is inevitable |
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What is Structural Unemployment?
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Unemployment of workers whose skills are not demanded, who lack sufficient skill to obtain employment available, or who cannot easily move to locations where jobs are available
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What is Cyclical Unemployment?
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Caused by insufficient total spending (in a recession)
- if there is none of this, there is full employment |
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What happens when NRU produces at its potential output or is "fully employed"?
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The number of job seekers equals the number of job vacancies
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What is inflation?
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The rise in the general level of prices (because some prices may fall and some prices may stay constant while others rise)
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How do you measure inflation?
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Calculate the Consumer Price Index (CPI) - updated every 2 yrs
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CPI = ?
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(price of the most recent market basket of a particular year) / (price of the same market basket in a previous year[s]) x 100
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What are the 2 types of inflation?
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(1) Demand-Pull Inflation
(2) Cost-Push Inflation |
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Demand-Pull Inflation (Explanation)
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When resources are already fully employed, the business sector cannot respond to excess demand by expanding output. Thus, the excess demand pulls up the prices of the limited output.
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Demand-Pull Inflation (IOW)
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Too Much Spending Chasing Too Few Goods
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Cost-Push Inflation (Explanation)
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An increased per unit cost of production decreases supply of G+S. Thus, Costs are pushing the price level upward in Supply Shocks.
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