GDP and Unemployment. Gross Domestic Product
|
|
- Dwain Fletcher
- 7 years ago
- Views:
Transcription
1 GDP and Unemployment Linus Yamane Gross Domestic Product Value of all (market value) Final (not intermediate) Goods and services (cars and haircuts) Produced (not buying stocks and bonds) For the marketplace (not home production) Over a given period of time (GDP is a flow) Within domestic borders (not imported) 1
2 Real vs Nominal Real and Nominal Price Quantity Price Quantity Computers $50 6 $40 11 Gasoline $30 7 $100 4 Books $70 10 $ $50 6 $30 7 $70 10 $1, $50 11 $30 4 $70 12 $1, $40 6 $100 7 $90 10 $1, $40 11 $100 4 $90 12 $1,920 2
3 GDP vs GNP Gross Domestic Product (GDP) produced within the domestic borders Gross National Product (GNP) produced by citizens (domestically owned factors of production) GDP GNP = net receipts of factor income from the rest of the world Which is larger, GDP or GNP in Saudi Arabia? Many foreign workers in Saudi Arabia (GDP) Saudis earn a lot of interest and profits on assets held abroad (GNP)* Circular Flow Diagram Product Approach Payment for Goods and Services These flows are equivalent Earnings Approach Payments for Factors of Production 3
4 Income and Output Income and Output are the same Example Barbershop cuts hair $12 per cut, 10 customers per day Barber s income = $120 Value of good produced and purchased = $120 Income = Output Income and Output Farmer grows grain Sells to miller for $1 Miller turns grain into flour Sells to baker for $1.75 Baker bakes flour into bread Sells bread to household for $3.00 GDP = $3.00 (one loaf of bread) Value added = $1.00 Value added = $0.75 Value added = $1.25 4
5 Income and Output Where does the $3.00 go? $1.75 for the flour $1.00 goes to the farmer for the grain Wages, rent, interest, and profit for running the farm $0.75 goes to wages, rent, interest, and profit for miller $1.25 goes to Wages for workers at the bakery Interest to those who lent money to the bakery Rent to the owner of the building and land Profit to the bakery owner Income and Output $3.00 $1.75 $1.25 Factor Payment Factor Payment $1.00 $1 $0.75 $1 Factor Payment Intermediate Good $1.75 Intermediate Good Grain Farmer Flour Miller Bread Baker 5
6 Product Approach Y = C + I + G + NX 2013 IV billions $ Consumption Food, cars, haircuts. 11,653.1 Gross Domestic Capital formation 2,773.7 Investment Government Goods and services 3,118.6 Net Exports Exports Imports Gross Domestic Product $17,102.5 Product Approach Consumption 11,653.1 Durables 1,284.4 Nondurables 2,658.0 Services 7,710.6 Investment 2,773.7 Structures & equipment 2,087.4 Residential Change in Inventories Net Exports Exports 2,329.7 Imports 2,772.5 Government 3,118.6 Federal 1,225.8 State & local 1,892.7 Gross Domestic Product GDP $17,
7 Earnings Approach National Income Employee compensation + Corporate profits + Proprietor's Income + Rental income + Net Interest 2013 IV billions $ 14,765* Indirect Business Taxes Sales taxes? Depreciation Capital consumption allowance 2,691.2 Net Factor Payments to the rest of the world Payments of factor income to the ROW minus the receipt of factor income from the rest of the world? Gross Domestic Product $17,102.5 Earnings Approach employee compensation total of all salaries, wages, benefits, pensions, and social security contributions 8,964.7 rent total income earned from property ownership net interest money earned by supplying capital 485 proprietor's income money earned by business owners, including incorporated businesses, partnerships and sole proprietorships 1,352.0 corporate profits income earned by stockholders 2,130* indirect business taxes all sales tax, business property tax and license fees minus subsidies? depreciation the decrease in the value of capital goods 2,691.2 net factor income Total payments to foreign entities for domestic production minus total payments received by domestic citizens from foreign entities? GDP Gross Domestic Product $17,
8 Depreciation Depreciation: when capital assets wear out, they decline in value Gross Investment = Net Investment + Depreciation Corporate Profits = Total Revenue Total Costs Total costs include depreciation costs Barbershop example Pay $12 for one haircut $8 is the salary of the barber $4 is the profit for Hair, Inc. But Hair, Inc subtracts off depreciation of $1, and reports $3 in profit Need to add $1 back in to get GDP Gross Investment, Net Investment, & Depreciation Gross Investment = $2,773.7 Net Investment = $82.5 Capital Stock = $42.5 trillion Depreciation = $2,
9 Net Investment has been rather low this century Three ways to calculate GDP Product (Expenditure) Approach C + I + G + NX Earnings (Factor Payments) Approach Wages + salaries + interest + rent + profit Value Added Approach Add up the value added of all firms 9
10 Income, Net Taxes, Savings Personal Income $14,295.6 billion Net Taxes $1,681.5 Taxes Transfers Disposable Personal Income $12,614.1 Consumption $12,069.0 Savings $545.1 Personal Savings Rate.,. Y = Yd + T = C + S + T 4.3% Important Identity Investment: purchases of new homes, buildings, plants, and equipment Savings: income which is not consumed (or paid in taxes) Let us ignore government and the foreign sector for a moment Product side Y = C + I Spending side Y = C + S Investment = Savings identity I = S 10
11 Important Identity When we include government and foreign sector Product side Y = C + I + G + NX Spending side Y = C + S + T I = S + (T G) NX Gross Investment Private Savings Gov Budget Surplus Net Exports $2,773.7 $3,540.9 $ 1,210.0 $ An identity is always true by definition Important Identity NX = foreign savings when we import (without equivalent exports), foreigners are lending us money to cover the cost of the imports I = Sp + Sg + Sf Investment = Private Savings + Government Savings + Foreign Savings 11
12 International Comparisons Country GDP PC PPP Country GDP PC PPP China $9,210 Nigeria $2,420 India 3,840 Bangladesh 2,070 United States 50,610 Russia 22,720 Indonesia 4,810 Japan 36,290 Brazil 11,720 Mexico 16,680 Pakistan 3,030 World Average 12,129 Norway 66,960 Congo 370 Singapore 61,100 Burundi 560 Shortcomings of GDP Measurement Problems Quality changes are not well accounted for in GDP measures Underground economy Nonmarket activities Production shift from the home to the market GDP is not social welfare Pollution Crime Worker Safety Distribution of income 12
13 GDP is not everything 18 Worker Safety Factory inspections and worker safety rules slow down production All production involves some risk So maximizing GDP does not necessarily maximize social welfare GDP Green Growth Production uses natural resources and generates pollution More productive technologies may be less polluting and use fewer resources than old production methods Positive relationships Safe water and good sanitation usually rise with GDP/PC Negative relationships Municipal waste/person and carbon monoxide emissions usually rise with GDP/PC Mixed relationships Urban concentration of particulate matter, urban concentration of sulfur dioxide usually rise and then fall with GDP/PC 13
14 Net Economic Welfare NEW (Net Economic Welfare) Adjust GDP for the costs of pollution, crime, worker safety, congestion, etc GDP is still a useful measure of well being See Gapminder.org Robert F. Kennedy on GDP (1968) It does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strengths of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our courage, nor our wisdom, nor our devotion to our country. It measures everything, in short, except that which makes life worthwhile, and it can tell us everything about America except why we are proud that we are Americans. 14
15 Unemployment Unemployed Not working Currently available for work Actively seeking employment or on temporary layoff (and expect to be recalled to old job) 16 years or older People with jobs, but not working due to illness, bad weather, labor disputes, and vacation are officially employed US Population (thousands) Labor Force 154,937 Employed 144,586 Civilian noninstitutional population 246,745 Unemployed 10,351 Population 317,477 Not in the Labor Force 91,808 Institutional Population 3,723 Military 1,439 Youngsters 65,570 15
16 Definitions Unemployment rate, 6.7%, Labor force participation rate Employment rate, 62.8%,, 58.6%, Not in Labor force Retired, school, disabled, rich, house spouse Institutional population Patient or inmate in prison, jail, hospital Unemployment Rates (Dec 2013) Men 6.8 Foreign Born 6.5 Women 6.5 Native Born 6.5 White 5.9 <HS 9.8 Black 11.9 HS 7.1 Hispanic 8.3 Some College 6.1 Asian 4.1 BA+ 3.3 Disabled 11.9 Veteran 5.5 Teenagers 20.2 Nonveteran
17 12 Unemployment Rates Percent 7 6 women men Year 24 Unemployment Rates Percent 12 9 white black hispanic asian Year 17
18 Why is there Unemployment Auction markets vs Administered markets Sources of wage stickiness Heterogeneity of labor Difficulty of grading labor Premium on long term relationships Long term contracts Laws, institutions & customs Voluntary vs Involuntary Unemployment Are wages flexible? Minimum wage Government mandated minimum wage Affects market for young and/or unskilled workers Union contracts 3 year contracts, cover 12.4% of workers Union sets wages, firms choose level of employment Efficiency Wages Worker productivity depends on the wage Reduces labor turnover, decreases hiring & training costs Better applicant pool Workers less likely to shirk 18
19 Definitional Problems Discouraged workers Half of unemployment spells end in withdrawal from the labor force million discouraged workers (Dec 2013) Part time workers million part time workers 29.3% are part time for economic reasons Underemployment English PhDs driving taxis in NYC Economist defini on BLS defini on Labor Market Flows INFLOW entrants into labor force quits layoffs involuntary quits (fired) Unemployment Pool OUTFLOW new hires recalls withdrawal from the labor force (discouraged workers) 19
20 Empirical Facts about Unemployment In recession, more layoffs and more discouraged workers In boom, more new hires, more entrants to labor force, and more quits Job losers rarely make up over 50% of all unemployed. Usually over 1/3 of unemployed are individuals entering the labor force. The rest are quits. Most people who become unemployed are unemployed for short duration. Most unemployment is accounted for by people unemployed for long duration Duration and Frequency of Unemployment Case A: each worker is unemployed 5% of time (2.5 weeks). Duration is 2.5 weeks, frequency is once a year Case B: 95% of workers are never unemployed during the year. 5% are unemployed all year. Duration is 1 year, frequency is once every 20 years. You have 5% unemployment in both cases 20
21 Unemployment 1. Frictional Unemployment Time spent by workers searching for jobs 2. Structural Unemployment When regional and occupational patterns of job vacancies do not match the pattern of worker availability 3. Cyclical Unemployment The increase in unemployment that occurs during recessions and depressions Natural Rate of Unemployment Level of frictional and structural unemployment Unemployment rate which corresponds to practical full employment (potential output) Where the number of job vacancies is equal to the number of unemployed Where there is no pressure on wages or prices (inflation) to rise or fall 21
22 Natural Rate of Unemployment Probably around 5% Unemployment benefits and insurance Due to laws regulating eligibility and extent of extended benefits, insured rate has fallen over time (search more intensively) Multiple earners Trend toward two or more income earners in a household (search less intensively) Costs of Unemployment Human costs and economic costs When unemployment rises, we tend to get.. higher family conflict more child abuse increased divorce more wife beatings higher suicide rates higher homicide and more admission to prison 22
23 Psychological Costs Death of spouse 100 Go to jail 66 Fired from Job 49 Close friend dies 47 Laid off from job 40 Flunk out of school 37 Child runs away 29 Economic Costs of Unemployment Okun s Law (1961) When unemployment goes up, GDP goes down For every 1% point that unemployment is above the natural rate, there is a 2% point GDP gap. 1 2 For every 2% points of growth in real GDP above the trend rate that is sustained for a year, the unemployment rate declines by 1% point. 23
24 Okun s Law Decrease in GDP comes from Decrease in the labor force Decrease in average hours worked Decrease in productivity Increase in unemployment In the short run, Okun observed that all these factors move together. Thus the unemployment rate is a proxy for all of the above. Economic Costs of Unemployment year unemployment rate (percent) Unemployed (thousands) NILF want a job (thousands) , , , , , , , , , , , , , ,380 24
25 Economic Cost of Great Recession year unemployment rate Real GDP GDP* GDP GAP $14,833.6 $15,070.9 $ , , , , , , , , , , , , , Total loss for operating below potential output Total $5,716.2 $18,032 in additional goods and services for every American (Honda Civic) 25
NATIONAL INCOME AND PRODUCT ACCOUNTING MEASURING THE MACROECONOMY
NATIONAL INCOME AND PRODUCT ACCOUNTING MEASURING THE MACROECONOMY 1. NIPA: GNP and GDP 2. Saving and Wealth 3. Prices and Inflation 4. Unemployment 5. Problems with Measuring the Macroeconomy There are
More informationFree-response/problem
Free-response/problem Explain why an economy s income must equal its expenditure. 0 23 Measuring a Nation s Income P R I N C I P L E S O F ECONOMICS F O U R T H E D I T I O N N. G R E G O R Y M A N K I
More informationGDP: Measuring Total Production and Income
Chapter 7 (19) GDP: Measuring Total Production and Income Chapter Summary While microeconomics is the study of how households and firms make choices, how they interact in markets, and how the government
More informationThe Data of Macroeconomics
CHAPTER 2 The Data of Macroeconomics Modified for ECON 2204 by Bob Murphy 2016 Worth Publishers, all rights reserved IN THIS CHAPTER, YOU WILL LEARN:... the meaning and measurement of the most important
More informationEconomics 212 Principles of Macroeconomics Study Guide. David L. Kelly
Economics 212 Principles of Macroeconomics Study Guide David L. Kelly Department of Economics University of Miami Box 248126 Coral Gables, FL 33134 dkelly@miami.edu First Version: Spring, 2006 Current
More informationMEASURING GDP AND ECONOMIC GROWTH*
Chapter 5 MEASURING GDP AND ECONOMIC GROWTH* Gross Domestic Product Topic: GDP 1) Gross domestic product is the total produced within a country in a given time period. A) market value of all final and
More informationChapter 15: Spending, Income and GDP
Chapter 15: Spending, Income and GDP By the end of this chapter, you will be able to: Define GDP Calculate GDP by: adding up value added of production. adding up expenditure. adding up income. Distinguish
More informationBig Concepts. Measuring U.S. GDP. The Expenditure Approach. Economics 202 Principles Of Macroeconomics
Lecture 6 Economics 202 Principles Of Macroeconomics Measuring GDP Professor Yamin Ahmad Real GDP and the Price Level Economic Growth and Welfare Big Concepts Ways to Measure GDP Expenditure Approach Income
More informationExam 1 Review. 3. A severe recession is called a(n): A) depression. B) deflation. C) exogenous event. D) market-clearing assumption.
Exam 1 Review 1. Macroeconomics does not try to answer the question of: A) why do some countries experience rapid growth. B) what is the rate of return on education. C) why do some countries have high
More informationReference: Gregory Mankiw s Principles of Macroeconomics, 2 nd edition, Chapters 10 and 11. Gross Domestic Product
Macroeconomics Topic 1: Define and calculate GDP. Understand the difference between real and nominal variables (e.g., GDP, wages, interest rates) and know how to construct a price index. Reference: Gregory
More informationUnit 4: Measuring GDP and Prices
Unit 4: Measuring GDP and Prices ECO 120 Global Macroeconomics 1 1.1 Reading Reading Module 10 - pages 106-110 Module 11 1.2 Goals Goals Specific Goals: Understand how to measure a country s output. Learn
More informationChapter 24. What will you learn in this chapter? Valuing an economy. Measuring the Wealth of Nations
Chapter 24 Measuring the Wealth of Nations 2014 by McGraw-Hill Education 1 What will you learn in this chapter? How to calculate gross domestic product (GDP). Why each component of GDP is important. What
More informationMeasuring the Aggregate Economy
CHAPTER 25 Measuring the Aggregate Economy The government is very keen on amassing statistics... They collect them, add them, raise them to the n th power, take the cube root and prepare wonderful diagrams.
More informationECONOMIC GROWTH* Chapter. Key Concepts
Chapter 5 MEASURING GDP AND ECONOMIC GROWTH* Key Concepts Gross Domestic Product Gross domestic product, GDP, is the market value of all the final goods and services produced within in a country in a given
More informationCHAPTER 5: MEASURING GDP AND ECONOMIC GROWTH
CHAPTER 5: MEASURING GDP AND ECONOMIC GROWTH Learning Goals for this Chapter: To know what we mean by GDP and to use the circular flow model to explain why GDP equals aggregate expenditure and aggregate
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Suvey of Macroeconomics, MBA 641 Fall 2006, Final Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Modern macroeconomics emerged from
More informationChapter 20. The Measurement of National Income. In this chapter you will learn to. National Output and Value Added
Chapter 20 The Measurement of National Income In this chapter you will learn to 1. Use the concept of value added to solve the problem of double counting when measuring national income. 2. Describe the
More informationHouseholds Wages, profit, interest, rent = $750. Factor markets. Wages, profit, interest, rent = $750
KrugmanMacro_SM_Ch07.qxp 11/9/05 4:47 PM Page 87 Tracking the Macroeconomy 1. Below is a simplified circular-flow diagram for the economy of Micronia. a. What is the value of GDP in Micronia? b. What is
More informationChapter 4 Measuring GDP and Economic Growth
Chapter 4 Measuring GDP and Economic Growth 1 Gross Domestic Product 1) Gross domestic product is the total produced within a country in a given time period. A) market value of all final and intermediate
More informationChapter 12: Gross Domestic Product and Growth Section 1
Chapter 12: Gross Domestic Product and Growth Section 1 Key Terms national income accounting: a system economists use to collect and organize macroeconomic statistics on production, income, investment,
More informationMacroeconomia Capitolo 7. Seguire l andamento della macroeconomia. What you will learn in this chapter:
Macroeconomia Capitolo 7 Seguire l andamento della macroeconomia PowerPoint Slides by Can Erbil 2006 Worth Publishers, all rights reserved What you will learn in this chapter: How economists use aggregate
More informationChapter 8. GDP : Measuring Total Production and Income
Chapter 8. GDP : Measuring Total Production and Income Instructor: JINKOOK LEE Department of Economics / Texas A&M University ECON 203 502 Principles of Macroeconomics Related Economic Terms Macroeconomics:
More informationMacroeconomics: GDP, GDP Deflator, CPI, & Inflation
HOSP 2207 (Economics) Learning Centre Macroeconomics: GDP, GDP Deflator, CPI, & Inflation Macroeconomics is the big picture view of an economy. Microeconomics looks at the market for a specific good, like
More informationMEASURING A NATION S INCOME
10 MEASURING A NATION S INCOME WHAT S NEW IN THE FIFTH EDITION: There is more clarification on the GDP deflator. The Case Study on Who Wins at the Olympics? is now an FYI box. LEARNING OBJECTIVES: By the
More informationMEASURING GDP AND ECONOMIC GROWTH CHAPTER
MEASURING GDP AND ECONOMIC GROWTH CHAPTER Objectives After studying this chapter, you will able to Define GDP and use the circular flow model to explain why GDP equals aggregate expenditure and aggregate
More informationLecture 1: Gross Domestic Product
Lecture 1: Gross Domestic Product August 28, 2014 Prof. Wyatt Brooks MEASURING A NATION S INCOME 0 Structure of the Course First Part of the Class: The macroeconomy in the long run Why are countries rich
More informationMeasuring GDP and Economic Growth
20 Measuring GDP and Economic Growth After studying this chapter you will be able to Define GDP and explain why GDP equals aggregate expenditure and aggregate income Explain how Statistics Canada measures
More informationGDP: Does It Measure Up? May 2013. Classroom Edition. An informative and accessible economic essay with a classroom application.
PAGE ONE Economics the back story on front page economics NEWSLETTER GDP: Does It Measure Up? May 2013 Classroom Edition An informative and accessible economic essay with a classroom application. Includes
More informationMacroeconomics Instructor Miller GDP Practice Problems
Macroeconomics Instructor Miller GDP Practice Problems 1. Gross domestic product in the economy is measured by the A) total number of goods and services produced in the economy. B) dollar value of all
More informationMacroeconomics. 2.1 Economic Activity
Macroeconomics McGee textbook Pages 249-264 Pages267-271 Pages 299-303 Readings 2 Online resources http://www.dineshbakshi.com/ib-economics www.econclassroom.com Khan Academy 3 Vocab 4 Learning Objectives
More informationHW 2 Macroeconomics 102 Due on 06/12
HW 2 Macroeconomics 102 Due on 06/12 1.What are the three important macroeconomic goals about which most economists, and society at large, agree? a. economic growth, full employment, and low interest rates
More informationNational Income Accounting
: A set of rules and definitions for measuring economic activity in the aggregate economy (The economy as a whole.) As we noted earlier, the main measure of aggregate economic activity are GDP and GNP
More informationComparing Levels of Development
2 Comparing Levels of Development Countries are unequally endowed with natural capital. For example, some benefit from fertile agricultural soils, while others have to put a lot of effort into artificial
More informationIntroduction to Macroeconomics
Introduction to Macroeconomics Macroeconomics the study of the economy as a whole We measure performance to track the development of the economy Why Measure Performance Helps the government develop tax
More informationChapter 2 The Measurement and Structure of the National Economy
Chapter 2 The Measurement and Structure of the National Economy Multiple Choice Questions 1. The three approaches to measuring economic activity are the (a) cost, income, and expenditure approaches. (b)
More informationPractice Problems on NIPA and Key Prices
Practice Problems on NIPA and Key Prices 1- What are the three approaches to measuring economic activity? Why do they give the same answer? The three approaches to national income accounting are the product
More informationChapter 11: Activity
Economics for Managers by Paul Farnham Chapter 11: Measuring Macroeconomic Activity 11.1 Measuring Gross Domestic Product (GDP) GDP: the market value of all currently yproduced final goods and services
More informationThe National Accounts and the Public Sector by Casey B. Mulligan Fall 2010
The National Accounts and the Public Sector by Casey B. Mulligan Fall 2010 Factors of production help interpret the national accounts. The factors are broadly classified as labor or (real) capital. The
More information11.1 Estimating Gross Domestic Product (GDP) Objectives
11.1 Estimating Gross Domestic Product (GDP) Objectives Describe what the gross domestic product measures. Learn two ways to calculate the gross domestic product, and explain why they are equivalent. 11.1
More informationChapter 5: GDP and Economic Growth
Chapter 5: GDP and Economic Growth Be Mean Green! Please consider the environment before printing this Chapter Outline. It ll be available online throughout the semester. For Firms private accounting measures
More informationANSWERS TO END-OF-CHAPTER QUESTIONS
ANSWERS TO END-OF-CHAPTER QUESTIONS 7-1 In what ways are national income statistics useful? National income accounting does for the economy as a whole what private accounting does for businesses. Firms
More information7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Chapter. Key Concepts
Chapter 7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Key Concepts Aggregate Supply The aggregate production function shows that the quantity of real GDP (Y ) supplied depends on the quantity of labor (L ),
More informationEcon 202 Final Exam. Table 3-1 Labor Hours Needed to Make 1 Pound of: Meat Potatoes Farmer 8 2 Rancher 4 5
Econ 202 Final Exam 1. If inflation expectations rise, the short-run Phillips curve shifts a. right, so that at any inflation rate unemployment is higher. b. left, so that at any inflation rate unemployment
More informationA. GDP, Economic Growth, and Business Cycles
ECON 3023 Hany Fahmy FAll, 2009 Lecture Note: Introduction and Basic Concepts A. GDP, Economic Growth, and Business Cycles A.1. Gross Domestic Product (GDP) de nition and measurement The Gross Domestic
More informationLecture 3: National Income Accounting Reference - Chapter 5. 3) The Income Approach
Lecture 3: National Income Accounting Reference - Chapter 5 3) The Income Approach The income approach defines GDP in terms of the income derived or created from producing final goods and services. Net
More informationChapter 5 Macroeconomic Measurement: The Current Approach Macroeconomics In Context (Goodwin, et al.)
Chapter 5 Macroeconomic Measurement: The Current Approach Macroeconomics In Context (Goodwin, et al.) Chapter Overview In this chapter, you will be introduced to a fairly standard examination of the National
More informationName: Date: 3. Variables that a model tries to explain are called: A. endogenous. B. exogenous. C. market clearing. D. fixed.
Name: Date: 1 A measure of how fast prices are rising is called the: A growth rate of real GDP B inflation rate C unemployment rate D market-clearing rate 2 Compared with a recession, real GDP during a
More informationPolitics, Surpluses, Deficits, and Debt
Defining Surpluses and Debt Politics, Surpluses,, and Debt Chapter 11 A surplus is an excess of revenues over payments. A deficit is a shortfall of revenues relative to payments. 2 Introduction After having
More information2 0 0 0 E D I T I O N CLEP O F F I C I A L S T U D Y G U I D E. The College Board. College Level Examination Program
2 0 0 0 E D I T I O N CLEP O F F I C I A L S T U D Y G U I D E College Level Examination Program The College Board Principles of Macroeconomics Description of the Examination The Subject Examination in
More informationEC201 Intermediate Macroeconomics. EC201 Intermediate Macroeconomics Problem Set 1 Solution
EC201 Intermediate Macroeconomics EC201 Intermediate Macroeconomics Problem Set 1 Solution 1) Given the difference between Gross Domestic Product and Gross National Product for a given economy: a) Provide
More informationEcon 202 Section 4 Final Exam
Douglas, Fall 2009 December 15, 2009 A: Special Code 00004 PLEDGE: I have neither given nor received unauthorized help on this exam. SIGNED: PRINT NAME: Econ 202 Section 4 Final Exam 1. Oceania buys $40
More informationMacroeconomics Machine-graded Assessment Items Module: Macroeconomic Measures of Performance
Macroeconomics Machine-graded Assessment Items Module: Macroeconomic Measures of Performance Machine-graded assessment question pools are provided for your reference and are organized by learning outcome.
More informationAnswer: A. Answer: A.16. Use the following to answer questions 6-9:
1. The rate of economic growth is best defined as the: A) percentage increase in real GDP over time. B) increase in investment as a percentage of GDP over time. C) percentage increase in consumption expenditures
More informationTracking the Macroeconomy
chapter 7(23) Tracking the Macroeconomy Chapter Objectives Students will learn in this chapter: How economists use aggregate measures to track the performance of the economy. What gross domestic product,
More informationI. Measuring Output: GDP
University of California-Davis Economics 1B-Intro to Macro Handout 3 TA: Jason Lee Email: jawlee@ucdavis.edu I. Measuring Output: GDP As was mentioned earlier, the ability to estimate the amount of production
More informationChapter 12. National Income Accounting and the Balance of Payments. Slides prepared by Thomas Bishop
Chapter 12 National Income Accounting and the Balance of Payments Slides prepared by Thomas Bishop Preview National income accounts measures of national income measures of value of production measures
More informationLesson 3 - National Income Accounting
Lesson 3 - National Income Accounting Acknowledgement: Ed Sexton and Kerry Webb were the primary authors of the material contained in this lesson. Section 1 - National Income Accounting History of National
More informationChapter 1 Lecture Notes: Economics for MBAs and Masters of Finance
Chapter 1 Lecture Notes: Economics for MBAs and Masters of Finance Morris A. Davis Cambridge University Press stands for Gross Domestic Product. Nominal is the dollar value of all goods and services that
More informationIntroduction to Macroeconomics. TOPIC 1: Introduction, definition, measures
TOPIC 1: Introduction, definitions, measures Annaïg Morin CBS - Department of Economics August 2013 What is macroeconomics about? Understanding the behavior of an economy as a whole. studying aggregated
More informationUnemployment and Inflation
Unemployment and Inflation Unemployment Inflation Costs of Unemployment Personal Cost Loss of income Loss of self-esteem Increase in stress related psychological problems Increase in incidence of crime,
More informationLECTURE NOTES ON MACROECONOMIC PRINCIPLES
LECTURE NOTES ON MACROECONOMIC PRINCIPLES Peter Ireland Department of Economics Boston College peter.ireland@bc.edu http://www2.bc.edu/peter-ireland/ec132.html Copyright (c) 2013 by Peter Ireland. Redistribution
More informationGovernment Budget and Fiscal Policy CHAPTER
Government Budget and Fiscal Policy 11 CHAPTER The National Budget The national budget is the annual statement of the government s expenditures and tax revenues. Fiscal policy is the use of the federal
More informationFinance, Saving, and Investment
23 Finance, Saving, and Investment Learning Objectives The flows of funds through financial markets and the financial institutions Borrowing and lending decisions in financial markets Effects of government
More informationCosumnes River College Principles of Macroeconomics Problem Set 3 Due September 17, 2015
Cosumnes River College Principles of Macroeconomics Problem Set 3 Due September 17, 2015 Name: Solutions Fall 2015 Prof. Dowell Instructions: Write the answers clearly and concisely on these sheets in
More informationObjectives for Class 24: The Business Cycle and Unemployment. Class 24 The Business Cycle and Unemployment (latest revision October 2004)
1 Objectives for Class 24: The Business Cycle and Unemployment At the end of Class 24, you will be able to: 1. Define each of the phases of the business cycle: expansion, peak, recession, depression, trough,
More informationASSIGNMENT 1 ST SEMESTER : MACROECONOMICS (MAC) ECONOMICS 1 (ECO101) STUDY UNITS COVERED : STUDY UNITS 1 AND 2. DUE DATE : 3:00 p.m.
Page 1 of 13 ASSIGNMENT 1 ST SEMESTER : MACROECONOMICS (MAC) ECONOMICS 1 (ECO101) STUDY UNITS COVERED : STUDY UNITS 1 AND 2 DUE DATE : 3:00 p.m. 19 MARCH 2013 TOTAL MARKS : 100 INSTRUCTIONS TO CANDIDATES
More informationTopic 4: Different approaches to GDP
Topic 4: Different approaches to GDP PRINCIPLES OF MACROECONOMICS Dr. Fidel Gonzalez Department of Economics and Intl. Business Sam Houston State University Three different approaches to measure the GDP
More informationI. Introduction to Aggregate Demand/Aggregate Supply Model
University of California-Davis Economics 1B-Intro to Macro Handout 8 TA: Jason Lee Email: jawlee@ucdavis.edu I. Introduction to Aggregate Demand/Aggregate Supply Model In this chapter we develop a model
More informationEconomics 101 Multiple Choice Questions for Final Examination Miller
Economics 101 Multiple Choice Questions for Final Examination Miller PLEASE DO NOT WRITE ON THIS EXAMINATION FORM. 1. Which of the following statements is correct? a. Real GDP is the total market value
More informationEC2105, Professor Laury EXAM 2, FORM A (3/13/02)
EC2105, Professor Laury EXAM 2, FORM A (3/13/02) Print Your Name: ID Number: Multiple Choice (32 questions, 2.5 points each; 80 points total). Clearly indicate (by circling) the ONE BEST response to each
More informationMeasuring the Economy
Measuring the Economy A Primer on GDP and the National Income and Product Accounts Concepts Framework Measures Interactive Access October 2014 Measuring the Economy A Primer on GDP and the National Income
More informationINTRODUCTION TO MACROECONOMICS MIDTERM- SAMPLE QUESTIONS
INTRODUCTION TO MACROECONOMICS MIDTERM- SAMPLE QUESTIONS MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) In May 2009, Ford Motor Company's sales
More informationFlow of Funds Accounts of the United States
June 5, 2008 Flow of Funds Accounts of the United States Annual Flows and Outstandings 2005-2007 Board of Governors of the Federal Reserve System, Washington D.C. 20551 Table of Contents Flows Levels Title
More informationLabor Demand The Labor Market
Labor Demand The Labor Market 1. Labor demand 2. Labor supply Assumptions Hold capital stock fixed (for now) Workers are all alike. We are going to ignore differences in worker s aptitudes, skills, ambition
More informationGDP Measuring Output and Income Part II. Alternative Measures Real World Approximations. Reading: RJB for lecture 5
GDP Measuring Output and Income Part II Alternative Measures Real World Approximations Reading: RJB for lecture 5 GDP: Statistical Approximations The Bureau of Economic Analysis (BEA) provides both annual
More informationChapter 10 Fiscal Policy Macroeconomics In Context (Goodwin, et al.)
Chapter 10 Fiscal Policy Macroeconomics In Context (Goodwin, et al.) Chapter Overview This chapter introduces you to a formal analysis of fiscal policy, and puts it in context with real-world data and
More informationWorkshop 6 The Building Blocks of Macroeconomics
Workshop 6 The Building Blocks of Macroeconomics Description Macroeconomics is the study of the behavior of the economy as a whole and the whole often behaves differently than the individual parts. This
More informationThe labor market. National and local labor markets. Internal labor markets. Primary and secondary labor markets. Labor force and unemployment
The labor market The labor market differs from most product markets in several important ways. Among these differences are: labor services are rented, not sold, labor productivity is affected by pay and
More information2 Macroeconomics LESSON 2 ACTIVITY 11 Answer
2 Macroeconomics LESSON 2 ACTIVITY 11 Answer Measuring Broad Economic Goals Part A Measuring Employment The unemployment rate (UR) is defined as number of unemployed UR = x 100 labor force The labor force
More informationMeasuring the Wealth of Nations
Measuring the Wealth of Nations Chapter 24 LEARNING OBJECTIVES LO 24.1 LO 24.2 LO 24.3 LO 24.4 LO 24.5 LO 24.6 Justify the importance of using the market value of final goods and services to calculate
More informationChapter 7: Classical-Keynesian Controversy John Petroff
Chapter 7: Classical-Keynesian Controversy John Petroff The purpose of this topic is show two alternative views of the business cycle and the major problems of unemployment and inflation. The classical
More informationMeasuring the Macroeconomy
Measuring the Macroeconomy CHAPTER 2 Learning Objectives After studying this chapter, you should be able to: 2.1 Explain how economists use gross domestic product (GDP) to measure total production and
More information2. Measuring the Macroeconomy
Intermediate Macroeconomics 2. Measuring the Macroeconomy Contents 1. Measuring Total Output A. Measurement B. Omissions from GDP 2. How to Measure GDP A. Expenditure Approach 1. Consumption 2. Investment
More informationPreparation course MSc Business & Econonomics- Macroeconomics: Introduction & Concepts
Preparation course MSc Business & Econonomics- Macroeconomics: Introduction & Concepts Tom-Reiel Heggedal Economics Department 2014 TRH (Institute) Intro&Concepts 2014 1 / 20 General Information Me: Tom-Reiel
More informationProblem Set for Chapter 10(Multiple choices)
Problem Set for Chapter 10(Multiple choices) 1. Because every transaction has a buyer and a seller, a. GDP is more closely associated with an economy s income than it is with an economy s expenditure.
More informationChapter: Practice Exam for Macro Indicators. Instruction: Name: Date: Multiple Choice
Chapter: Practice Exam for Macro Indicators Instruction: Name: Date: Multiple Choice 1. GDP does not include A) vegetables grown and consumed by a nonfarm family. B) the purchase of a new Porsche. C) the
More informationChapter 7 Employment and Unemployment Macroeconomics In Context (Goodwin, et al.)
Chapter 7 Employment and Unemployment Macroeconomics In Context (Goodwin, et al.) Chapter Overview This chapter introduces you to standard macro labor topics such the definition of the unemployment rate,
More informationAGGREGATE DEMAND AND AGGREGATE SUPPLY The Influence of Monetary and Fiscal Policy on Aggregate Demand
AGGREGATE DEMAND AND AGGREGATE SUPPLY The Influence of Monetary and Fiscal Policy on Aggregate Demand Suppose that the economy is undergoing a recession because of a fall in aggregate demand. a. Using
More informationUNIT I NATIONAL INCOME AND MACROECONOMICS
UNIT I NATIONAL INCOME AND MACROECONOMICS 1 National Income National Income is defined as the sum total of all the goods and services produced in a country, in a particular period of time. Normally this
More informationAlternatives to the GDP
ECONOMIC INDICATORS measure economic well-being and wealth- Money is the only measure of well-being recognized by conventional economies - the price of something is a measure of its value When countries
More informationPrinciples of Macro - Fall 2008 - EXAM 2
Principles of Macro - Fall 2008 - EXAM 2 Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. 1. Which of the following is true? a. Although levels
More informationUniversity of Lethbridge Department of Economics ECON 1012 Introduction to Microeconomics Instructor: Michael G. Lanyi. Chapter 20 Measuring GDP
University of Lethbridge Department of Economics ECON 1012 Introduction to Microeconomics Instructor: Michael G. Lanyi Chapter 20 Measuring GDP 1) Gross domestic product is A) the market value of all the
More informationSolutions to Problem Set #2 Spring, 2013. 1.a) Units of Price of Nominal GDP Real Year Stuff Produced Stuff GDP Deflator GDP
Economics 1021, Section 1 Prof. Steve Fazzari Solutions to Problem Set #2 Spring, 2013 1.a) Units of Price of Nominal GDP Real Year Stuff Produced Stuff GDP Deflator GDP 2003 500 $20 $10,000 95.2 $10,504
More informationCONCEPT OF MACROECONOMICS
CONCEPT OF MACROECONOMICS Macroeconomics is the branch of economics that studies economic aggregates (grand totals):e.g. the overall level of prices, output and employment in the economy. If you want to
More informationGDP: The market value of final goods and services, newly produced WITHIN a nation during a fixed period.
GDP: The market value of final goods and services, newly produced WITHIN a nation during a fixed period. Value added: Value of output (market value) purchased inputs (e.g. intermediate goods) GDP is a
More informationThe Circular Flow of Income and Expenditure
The Circular Flow of Income and Expenditure Imports HOUSEHOLDS Savings Taxation Govt Exp OTHER ECONOMIES GOVERNMENT FINANCIAL INSTITUTIONS Factor Incomes Taxation Govt Exp Consumer Exp Exports FIRMS Capital
More informationChapter 18. MODERN PRINCIPLES OF ECONOMICS Third Edition
Chapter 18 MODERN PRINCIPLES OF ECONOMICS Third Edition Fiscal Policy Outline Fiscal Policy: The Best Case The Limits to Fiscal Policy When Fiscal Policy Might Make Matters Worse So When Is Fiscal Policy
More informationFlow of Funds Data Dictionary
Flow of Funds Data Dictionary October 2003 This version of documentation is preliminary and does not necessarily represent the current Global Insight (formerly DRI WEFA) database. The availability of specific
More informationMiami Dade College ECO 2013.003 Principles of Macroeconomics - Fall 2014 Practice Test #2
Miami Dade College ECO 2013.003 Principles of Macroeconomics - Fall 2014 Practice Test #2 1. Whose analysis serves as the foundation of modern macroeconomics? A) Milton Friedman B) John Maynard Keynes
More information