Macroeconomics Principles Midterm 2 Review Konan: Macroeconomics Hubbard O’Brien Chapters 8, 9, 10, 11, 12

Macroeconomics Principles Midterm 2 Review Konan: Macroeconomics Hubbard O’Brien Chapters 8, 9, 10, 11, 12 Macroeconomics Principles Midterm 2 Review Konan: Macroeconomics Hubbard O’Brien Chapters 8, 9, 10, 11, 12 BusinesszCyclez-zCORRECTzANSWER-alternatingzperiodszofzeconomiczexpansionzandzeconomiczrecession Expansionz-zCORRECTzANSWER-thezperiodzofzazbusinesszcyclezduringzwhichztotalzproductionzandztotalzemploymentzarezincreasing Recessionz-zCORRECTzANSWER-thezperiodzofzazbusinesszcyclezduringzwhichztotalzproductionzandztotalzemploymentzarezdecreasing EconomiczGrowthz-zCORRECTzANSWER-thezabilityzofzthezeconomyztozincreasezthezproductionzofzgoodszandzservices InflationzRatez-zCORRECTzANSWER-thezpercentagezincreasezinzthezpricezlevelzfromzonezyearztoztheznext GrosszDomesticzProductz(GDP)z-zCORRECTzANSWER-thezmarketzvaluezofzallzfinalzgoodszandzserviceszproducedzinzazcountryzduringzazperiodzofztime (canzalsozbezmeasuredzasztotalzincome) FinalzGoodzorzServicez-zCORRECTzANSWER-finalzproductzonzazproductionzline IntermediatezGoodzorzServicez-zCORRECTzANSWER-azgoodzorzservicezthatziszanzinputzintozanotherzgoodzorzservice TransferzPaymentsz-zCORRECTzANSWER-paymentszbyzthezgovernmentztozhouseholdszforzwhichzthezgovernmentzdoesznotzreceivezaznewzgoodzorzservicezinzreturn ComponentszofzGDPz-zCORRECTzANSWER-Y=C+I+G+NX Consumptionz-zCORRECTzANSWER-spendingzbyzhouseholdszonzgoodszandzservices,zwithzthezexceptionzofzpurchaseszofznewzhousing Investmentsz-zCORRECTzANSWER-businesszfixedzinvestments,zresidentialzinvestments,zandzchangezinzbusinesszinventories GovernmentzPurchasesz-zCORRECTzANSWER-spendingzonzgoodszandzserviceszbyzlocal,zstate,zandzfederalzgovernments NetzExportsz-zCORRECTzANSWER-exportsz-zimports Value-AddedzMethodz-zCORRECTzANSWER-thezsumzofzthezvaluezaddedzatzeachzstagezofzproductionzbyzeveryzfirmzincludedzinzthezprocesszofzazgoodzorzservice HouseholdzProductionz-zCORRECTzANSWER-thezproductionzofzgoodszandzserviceszinzthezhome UndergroundzEconomyz-zCORRECTzANSWER-buyingzandzsellingzofzgoodszandzserviceszthatziszconcealedzfromzthezgovernmentztozavoidztaxeszorzregulationszorzbecausezthezgoodszandzserviceszarezillegal GDPzShortcomingsz-zCORRECTzANSWER--Householdzproductionznotzincluded -Undergroundzeconomyznotzincluded -Valuezofzleisureznotzincluded -Negativezexternalitiesznotzincludedz(pollution) -Changeszinzcrimezandzsocialzproblemsznotzincludedz -Economiczinequalityznotzincluded NominalzGDPz-zCORRECTzANSWER-thezvaluezofzfinalzgoodszandzserviceszevaluatedzatzcurrent-yearzprices Realz=zNominalzatzbasezyear RealzGDPz-zCORRECTzANSWER-thezvaluezofzfinalzgoodszandzserviceszevaluatedzatzbase-yearzprices Realz=zNominalzatzbasezyear PricezLevelz-zCORRECTzANSWER-thezaveragezpriceszofzallzgoodszandzserviceszinzthezeconomy GDPzDeflatorz-zCORRECTzANSWER-azmeasurezofzthezpricezlevelzcalculatedzaszthezNominalzGDP/RealzGDPzxz100 =z100zatzbasezyearzPaaschezpricezindex.zBasketzchangeszoverztime.zGDPzdeflatorzincludeszallzdomesticallyzproducedzgoodszconsumerzorzcapital,zbutzexcludeszimportedzgoods. GrosszNationalzProductz(GNP)z-zCORRECTzANSWER-thezvaluezofzallzgoodszandzserviceszproducedzbyzazcountry'szcitizens,zevenzifzproductionztakeszplacezoutsidezofzthezUS. NationalzIncomez-zCORRECTzANSWER-GDPz-zthezconsumptionzofzfixedzcapitalz(depreciation) PersonalzIncomez-zCORRECTzANSWER-Incomezreceivedzbyzhouseholds NationalzIncomez-zretainedzearningsz+ztransferzpaymentsz+zinterestzonzgovernmentzbonds DisposablezPersonalzIncomez(DPI)z-zCORRECTzANSWER-thezincomezofzhouseholdszafterztaxeszhavezbeenzpaid personalzincomez-zpersonalztax HouseholdzSurvey/CurrentzPopulationzSurveyz-zCORRECTzANSWER-monthlyzsurveyzsamplezofz60,000zhouseholdszbyzthezBLSztozcollectzemploymentzdata Employedz-zCORRECTzANSWER-someonezwhozcurrentlyzhaszazjobzorzwhozisztemporarilyzawayzfromzhiszorzherzjob Unemployedz-zCORRECTzANSWER-someonezwhozisznotzcurrentlyzatzworkzbutzwhoziszavailablezforzworkzandzwhozhaszactivelyzlookedzforzworkzduringzthezpreviouszmonth LaborzForcez-zCORRECTzANSWER-employedz+zunemployed UnemploymentzRatez-zCORRECTzANSWER-unemployed/laborzforcezxz100 adultzpopulationzratez-zCORRECTzANSWER-adultzpop/totalzpop laborzforcezparticipationzratez-zCORRECTzANSWER-laborzforce/adultzpopulationzxz100 DiscouragedzWorkersz-zCORRECTzANSWER-individualszwhozwouldzlikeztozworkzbutzhavezgivenzupzlookingzforzazjobzbecauseztheyzbelieveznozjobszarezavailablezforzthem ProblemszwithzthezUnemploymentzRatez-zCORRECTzANSWER--doesznotzdistinguishzbetweenzfull-timezandzpart-timezworkerszandzpeoplezworkingzpart-timezwhozwantzfull-timezjobs -excludeszdiscouragedzworkers -nozverificationzofzsurveys;zfalsezresponses -doesznotzincludezpeoplezoffzthezrecordzorzinzthezundergroundzeconomy EstablishmentzSurvey/PayrollzSurveyz-zCORRECTzANSWER--monthlyzsurveyzsamplezofz300,000zbusinesseszbyzthezBLSztozcollectzemploymentzdataz -reliedzonzbyzeconomists -figureszarezmorezaccurate DrawbackszofzEstablishmentzSurvey/PayrollzSurveyz-zCORRECTzANSWER--doesn'tzincludezself-employedzaszemployed -mayzfailztozcountznewzemployeeszatznewlyzopenedzfirms -providesznozinformationzonzunemployment -BLSzconstantlyzreviseszthezdata;zdatazchanges Alternatezmeasureszofzunemploymentz-zCORRECTzANSWER-SerieszU-3:zunemploymentzrate SerieszU-6:zIncludeszdiscouragedzworkerszandzunderemployedzworkerszintozunemploymentzstatistics. Reasonszforzunemploymentz-zCORRECTzANSWER-1)zJobzlosers 2)zjobzleavers/quitters 3)zNewzentrants 4)zre-entrants FrictionalzUnemploymentz-zCORRECTzANSWER-short-termzunemploymentzthatzariseszfromzthezprocesszofzmatchingzworkerszwithzjobs.zNotzsensitivezdozbusinesszcycle.zFoundzamongzjobzleavers,znew-entrants,zre-entrants.zSolutions:zemploymentzagencies,zinternetzjobzsearches SeasonalzUnemploymentz-zCORRECTzANSWER-unemploymentzcausedzbyzseasonalzchangeszinzthezdemandzforzcertainzkindszofzlabor.z(partzofzfrictional) StructuralzUnemploymentz-zCORRECTzANSWER-unemploymentzthatzariseszfromzazpersistentzmismatchzbetweenzthezskillszorzattributeszofzworkerszandzthezrequirementszofzjobs.zDuration:zlongzterm.zFoundzamongzjobzlosers.zNotzsensitiveztozbusinesszcycle.zSolutions:zjobztrainingzprograms,zrelocationzsubsidies. CyclicalzUnemploymentz-zCORRECTzANSWER-unemploymentzcausedzbyzazbusinesszcyclezrecession.zMostlyzlongzterm.zFoundzmostlyzamongzjobzlosers.zSolution:zraisezaggregatezdemandzforzfiscalzandzmonetaryzpolicy. NaturalzRatezofzUnemploymentz-zCORRECTzANSWER-theznormalzratezofzunemployment,zconsistingzofzfrictionalzunemploymentzandzstructuralzunemployment Trendszinzlaborzstatisticsz-zCORRECTzANSWER-mostzspellszofzunemploymentzarezshortzterm.zMajorityzofzunemployedzarezforz3-4zmonths.zBustzmostzofzobservedzunemploymentziszfromzlongztermzunemployed. Policieszthatzdecreasezunemploymentz-zCORRECTzANSWER--fiscalzpolicy -monetaryzpolicy -govtztrainingzprograms -govtzemploymentzagencies -govtzrelocationzsubsidies -govtzsubsidiesztozfirms FactorszthatzIncreasezUnemploymentz-zCORRECTzANSWER--unemploymentzinsurance -minimumzwagezlaw -laborzunions -efficiencyzwages LaborzUnionsz-zCORRECTzANSWER-anzorganizationzformedzbyzworkersztozstrivezforzbetterzwageszandzworkingzconditions MinimumzWagezLawz-zCORRECTzANSWER-azfederalzlawzthatzspecifieszthezlowestzhourlyzwagezratezthatzcanzbezpaidztozworkers UnemploymentzInsurancez-zCORRECTzANSWER-paymentszbyzthezgovernmentzforzazlimitedzperiodzofztimeztozpeoplezwhozhavezlostztheirzjobs EfficiencyzWagez-zCORRECTzANSWER-anzabovezmarketzwagezthatzazfirmzpaysztozmotivatezworkersztozbezmorezproductivezandzloyal.zImproveszworkers:zhealth,zquality,zturnover,zandzeffort ConsumerzPricezIndexz(CPI)z-zCORRECTzANSWER--azmeasurezofzthezaveragezchangezoverztimezinzthezpriceszaztypicalzurbanzfamilyzofzfourzpayszforzthezgoodszandzservicesztheyzpurchase.zFixedzbasketz(don'tzhaveztozchangezquantity) Laspeyreszpricezindex.zExcludeszpriceszofzcapitalzorzinvestmentzgoods. -zmeasureszinflation -CoLasz-zcostzofzlivingzadjustment -Adjustzvalueszoverztime