ECON 214 Test 1 review
1. GDP per capita*
a. GDP = market value of all final goods and services produced within
a country during a specific period
b. Expenditure approach adds all of the following to get GDP:
I. Personal consumption expenditures (household spending on
goods/services)
ii. Gross private domestic investment (private-sector spending
on durable assets + additions to inventories)
iii. Government consumption and gross investment (federal,
state, local spending; measured by cost to taxpayers, not value they
yield)
iv. Net exports of goods and services (exports minus imports)
2. Business cycle – contraction and expansion phases
3. Contributions to GDP
I. goods and services (outputs that provide benefits without the
production of a tangible product)
Ii. THE SALE PRICE OF ALL FINAL GOODS IN A CERTAIN PERIOD
-only goods and services produced domestically, within physical
borders of nation, and output of foreign owned firms that produce
inside US
à$2 flour to make $5 bread for sale
4. Consumption in GDP in terms of its percentage
I. the purchase of final goods and services by households, with the
exception of new housing (includes everything from groceries to
automobiles)
-can be nondurable and durable
-nondurable: goods consumed over short period, purchase
regardless of economic condition
-durable: consumed over long period (cars, appliances)
5. Real GDP*
I. Nominal GDP/price level x 100
àNominal GDP for 2010 was 24,000 billion and GDP deflator was 120
6. GDP deflator*
I. price level we use to adjust GDP data includes the prices of final
goods and services counted in GDP.
-serves to deflate all the price inflation out of nominal GDP so that
we can see real GDP
7. %Δ in nominal GDP = %Δ in real GDP + %Δ in GDP deflator
8. Official unemployment
I. occurs when a worker who is not currently employed is searching for
a job without success
9. Types and causes of unemployment
Structural Unemployment:: caused by changes in the industrial
makeup (structure) of the economy
-occurs when economy is healthy and growing
-can't be eliminated but can be reduced by retraining, relocating,
or changing their expectations in some way
Frictional Unemployment:: caused by delays in matching available
jobs and workers, this job transition creates unemployment
-occurs when economy is healthy and growing
Natural Unemployment:: frictional and structural unemployment
àInternet and information and unemployment
(??????????????????????)
10. Natural unemployment
I. Natural (normal) unemployment is the unemployment rate
during normal economic growth
**Frictional unemployment plus structural unemployment =
natural (normal) unemployment
11. Unemployment, employment-population , and labor force participation
rates*
12. Underemployment
I. workers who have part-time jobs but would like to have a full-time job
13. Deflation and its impact
I. occurs when overall prices fall, is is negative inflation
-periods of recessions often coincide with falling inflation rates
-prices don't all move together, some prices fall even when most
others rise, some prices affect consumers more than others
14. CPI
measure of the price level based on the consumption patterns
of a typical consumer (idea is to include everything a typical
consumer buys)
-predominant measure of the general price level
-reflects the overall rise in prices for consumers on average
15. The largest percentage category
in CPI Housing 41%
16. Compare the value money in different years
Equations::
Real GDP=Nominal GDP/price level x 100
Nominal GDP Growth= GDP2-GDP1/gdp1 x
100
Labor Force Participation Rate= Labor force/working age
population Unemployment Rate= number unemployed
/labor force x 100 GDP= GDP=C+I+G+(exports-imports)
