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Macroeconomics Unit 1 Study Guide

by: Sydney Dowd

Macroeconomics Unit 1 Study Guide ECON 2105 080

Marketplace > Georgia State University > Economcs > ECON 2105 080 > Macroeconomics Unit 1 Study Guide
Sydney Dowd
GPA 4.0

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About this Document

This was the study guide I used for the First Exam.
Elena Andreyeva
Study Guide
Econ, Study Guide, Macroeconomics, test
50 ?





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This 2 page Study Guide was uploaded by Sydney Dowd on Friday February 26, 2016. The Study Guide belongs to ECON 2105 080 at Georgia State University taught by Elena Andreyeva in Spring 2016. Since its upload, it has received 49 views. For similar materials see PRINCIPLES OF MACROECONOMICS in Economcs at Georgia State University.


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Date Created: 02/26/16
Economics / Exam 1 / Chapter 6, 7, 8 / 11 February 2016 Chapter 6 GDP: final products, legally produced goods and services (not resold), produced IN a nation - Consumption includes durable (cars, appliances) and nondurable (magazines, medicines) goods. - Investment includes new housing, tools, factories, unsold goods, equipment used by businesses to produce future output. GDP = C + I + G + exports - imports Real GDP: uses base year prices (prices constant to measure quantity) Nominal GDP: uses current year prices Price level: index used to measure prices of goods/services in an economy GDP deflator: average measure of all prices in an economy (better for seeing how price changes affect overall economy) Real GDP = ???????????????????????????? ???????????? x 100 or Real = (n/pL) x 100 ???????????????????? ???????????????????? Calculating any kind of change: ????????????−???????????? x 100 ???????????? Per capita GDP measures the living standard in a nation more accurately because it adjusts for population. Chapter 7 Business cycle: short-run change in economic activity Recession: period of economic downturn, output and employment fall Prolonged recession: depression Expansion: opposite of recession Peak – all economic indicators reached max value before fall Trough – all economic indicators reach lowest value before rise Characteristics of Business Cycle: - Irregular - Last for different periods of time - Temporary The National Bureau of Economic Research (NBER) determines when recessions/expansions officially end Shortcomings of GDP: Doesn’t measure nonmarket goods, cannot distinguish differing conditions in a country, doesn’t account for time amount goods take to be produced Unemployment 3 Types of Unemployment: - Structural: due to industry changes - Frictional: delays like considering job offers, time before company checks email, recent college graduates, spouse of person who moved for work, etc - Cyclical: economic Unemployment insurance may encourage people to not find jobs (softens blow?). The Labor Force definition: people who are employed or actively seeking work # ???????????????????????????????????????? unemployment rate = u = ???????????????????? ???????????????????? x 100 Relevant population: eligible for labor force consideration (noninstitutionalized, civilian, 16+) ???????????????????? ???????????????????? Discouraged workers: unemployed, NOT searching for work, labor force participation rate: x 100 not in labor force/unemployed ???????????????????? ????????????. Underemployed workers – ARE included in employed, overqualified Chapter 8 Calculating CPI (consumer price index) pL Inflation: continuing growth in general price level ???????????? Deflation: opposite – price level falls ???????????? ???????????????? ???????? CPI and EPI (basket price)  price changes, quantity constant  base year CPI will always be 100, GDP  price does NOT change, quantity changes but EPI varies!!! Chained CPI – more concise, accurate measurement of CPI Calculating interest rate because it adjusts for more changes i =???????? ????????−???????????? ???????? = x 100  Weight of goods included in CPI matters!! ???????????? ???????? (????????????) The Costs of Inflation  BASE YR pL = 100 Shoe leather cost: time and energy spent making extra trips to bank, holding less cash in bank to counteract inflation Money illusion: interpreting nominal wages as real wages Real Wage: nominal (paycheck point-blank) adjusted for price level change Real wage = nom/CPI x 100 Price confusion: when producers don’t know if they should up production of product… demand up production Price increase + inflation do not up production Tax disortions: If you sold a thing you bought for a higher price but the CPI increased the same amount, you didn’t make a profit. As well, you have to pay taxes on that “gain” you pay tax on nonexistent gain! ???????? ???????????????????? $ today = $ then x $ earlier = $ today x???? ???????????????? ???????? ???????????????? ???????? ???????????????????? Hyperinflation: inflation rate of 50% +


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