ECON201 Exam 1 Study Guide Chapter 10 National Output GDP market value of all final goods services produced within a country in a given period of time Intermediate goods used as ingredients in production raw materials o o Y C I G NX o o o Gov t Purchases G includes all gov t spending excludes transfer payments SS or insurance o Net Exports NX exports imports Consumption C includes rent payments excludes house purchase price mortgage Investment I includes capital equipment structures houses inventories excludes stocks bonds Nominal GDP values of output using current prices not corrected for inflation Real GDP values output using the prices of a base year corrected for inflation o If country has nominal GDP of 20 and GDP deflator is 50 real GDP 40 GDP Deflator measure of the overall level of prices percent increase in deflator from one year to the next measures inflation rate Chapter 11 Inflation How CPI is Calculated fix the basket determine what s in typical consumers shopping basket find the prices collect data on prices of all the goods in the basket compute the basket s cost Substitution bias consumer substitution toward goods that have become inexpensive GDP Deflator vs CPI Imported goods excluded from GDP deflator Capital goods excluded from CPI Basket CPI uses fixed GDP uses currently produced goods services Indexation when the dollar amount is automatically corrected for inflation Real interest rate nominal inflation Loanable funds all income that people have chosen to save and lend out and to the amount that investors have chosen to borrow to fund new investment projects If gov t institutes policies that increase incentives to save then the supply of loanable funds shifts right producer price index measure of the cost of a basket of goods services bought by firms useful in predicting changes in the rate of output of goods services Chapter 15 Unemployment employed paid employees self employed and unpaid workers in family business unemployed people not working who have looked for work during previous 4 weeks labor force employed unemployed Types of Unemployment Seasonal seasonal changes in employment Frictional people move between jobs Structural mismatch between skills of workers and requirement of available jobs Cyclical lack of job vacancies Hysteresis the long lasting influence of history on variables such as the natural rate of unemployment Chapter 13 Loanable Funds financial system institutions that help match savers and investors financial markets institutions thru which savers can directly provide funds to borrowers financial intermediaries institutions thru which savers can indirectly provide funds to borrowers private saving portion of households income that is not used for consumption taxes Y T C public saving tax revenue gov t spending T G national saving portion of national income that is not used for consumption or gov t purchases Y C G crowding out gov t borrows to finance its deficit leaving less funds available for investment o o o o o o o o o o o o
View Full Document
Unlocking...