MACRO Exam 1 Study Guide
MACRO Exam 1 Study Guide ECON 2013
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Date Created: 09/18/16
NOTES FROM CLASS 1. Basis Point one onehundredth (1/100) of a percent (%) 2. Janet Yellen speech a. Friday 08/26/16 3. P.A.P. a. Process b. Answer c. Presentation 4. Elections have been about econ since 1932 with exception of 1944, 1964, 1968, 2000, 2004 a. 1968 comparable to 2016 i. Unrest 5. People vote what they like might be change, might be same change happens when people are dissatisfied 6. Legacy Costs a. Ongoing costs with no benefit to employer AFFECT REAL UNEMPLOYMENT i. Retirement ii. Social Security iii. Pensions iv. Healthcare 1. Employer must provide if they have over 50 employees a. Leads to contract work 7. What is the economy? a. Economy = Domestic Sector + Foreign Sector i. Defined later in notes b. Consumption i. Spending ii. Personal c. Government d. Business i. Investment e. Imports f. Exports 8. Liberal economist economy cycle starts with spending, product is built or not built based on demand 9. Conservative economist a. Economic cycle starts with supply, i. work>pay>spend>employment 10. ANALYZE TRENDS a. Snapshots lie i. Look at the trending direction 1. TREND IS ALWAYS MORE IMPORTANT THAN SIZE b. Value of a dollar changes over time i. Not always down, but trend is generally down 11. rGDP a. Real Gross Domestic Product i. Accounts for inflation 12. GDP a. Gross Domestic Product i. Doesn’t account for inflation 13. Money multiplier: money is multiplied in the economy because of people's tendency to spend when they have income or income increases a. Ex: $4 becomes $10 i. $4 is spent on a water bottle 1. $3 of that is spent on a pen a. $2 of that is spent on notes i. $1 of that is spent on an empty water bottle 1. Money multiplier would be 2.5 14. Want more from producers? a. Businesses keep profits in foreign economies to pay less in taxes i. Keep investing that money in foreign business b. Offer incentives i. Tax breaks 1. Texas has 0% income tax 2. New York has low corporate tax rate 15. CELL a. Employment i. Capital ii. Entrepreneur iii. Land iv. Labor 16. Capacity Utilization Rate (CUR) a. Percentage (%) of capacity utilized 17. Slack Capacity a. Percentage (%) less than 100% of capacity utilization rate 18. Most sensitive price a. Gas i. Effects American middle class 19. Liberal economics a. Government always trying to find a solution 20. Conservative economics a. It’ll work itself out 21. Monetist economics (monetarism) a. Constant cash flow will keep economy afloat 22. What’s the most counterfeited bill? a. $20 23. Prices change a. Surplus prices go down, value of dollar increases b. Shortage prices go up, value of dollar decreases 24. Final good a. Completely ready for sale 25. Intermediate good a. Product is not finished 26. Illegal goods and services a. Make up underground economy b. “Don’t know how much they are” c. Largest cash crop in Oklahoma (OK) is marijuana 27. Voluntary services are not included in GNP 28. Gross National Product (GNP) a. Total dollar value of all final legal goods and services exchanged (sold) in the marketplace over a period of time (quarterly or yearly usually) b. (GNP) = C + I + G + (X M) 1. C Consumption individual 2. I Investment business 3. G Government state, local, national 4. X Exports 5. M Imports ii. Private sector = C + I iii. Domestic sector = C + I + G iv. Public sector = G (state, local, national) v. Foreign sector = (X M) 29. Typical car factor assembly line is 21 miles 30. Decreasing money supply(ms) a. Increases interest rates(ir) i. Money becomes more expensive to borrow because there is less of it in the market 31. Increasing money supply a. Decreases interest rates i. Money becomes cheaper to borrow because there is more of it in the market 32. Interest rate on mortgage is the biggest part of the loan a. Made to payback for inflation and a profit 33. Many believe The Fed caused the Great Depression of the 1930s and the massive inflation seen in the 1970s through their policies at the time 34. Interest rates being low might stimulate consumption a. But it KILLS savings i. No point in saving money when you get 0.01% interest at the bank 35. Dove a. Believes there’s no inflation i. Might even need to lower interest rates 36. Hawk a. Believes inflation is a problem i. Always fighting 1. Wants to increase interest rates 37. Increase in money supply a. Goal is to increase in i. Consumption ii. Investments 1. Commodities 2. Real estate 3. Currencies 4. Collectables 5. Debt market 6. Stock market 38. Rule of 72 a. Investment(n) multiplied by interest rate(ir) is about 72 i. (n)x(r)=72 1. How long does it take to double the price(investment) at 2% inflation(interest) a. (n)x(2)=72 i. (n)=36 1. 36 years 39. Highest inflation ever? a. Germany after WWI i. Upwards of 10,000% 1. Price doubles every 2.626 days 40. Oil price is quoted in United States Dollars (U.S.D.) a. Inflation increases = money supply decrease = value of U.S.D. increases = price of oil (Poil) decreases i. Money supply(ms) decreases because the money becomes worth less with the higher inflation ii. Value of U.S.D. increases because there are fewer on the market iii. Price of oil(Poil) decreases because the U.S.D. is worth more internationally 1. With higher interest rates, the demand to invest in the U.S. increases a. Have to pay in U.S.D. i. More demand for U.S.D. 41. Big drops happen in the stock market in October a. September is the worst month for stocks i. Anticipation 42. Bubble economy a. Bases around stock market and real estate both increasing as the money supply increases 43. Stanley Fischer a. Vice chair of The Fed b. BIG hawk 44. Active meeting a. The Fed will be talking about interest rates at this meeting 45. Unemployment rate a. UR 46. Doubling a penny each day in a 31day month turns $0.01 on day one into $10,737,418.24 on day 31 47. People take more risk with investments when interest rates are low a. Risk can lead to failure 48. Look up the U6 unemployment rate a. http://www.macrotrends.net/1377/u6unemploymentrate b. Most accurate i. Accounts for underemployed 49. Macroeconomic Goals of the United States a. Set after WWII b. U.S. was only functioning, large scale economy i. Stable prices 1. About 2% inflation ii. Full employment 1. UR at about 5% iii. Steady economic growth 1. Avoid highs and lows of the cycle with regulation iv. Favorable balance of trade 1. Export more than imported i. Trade surplus b. The U.S. has imported more than exported for some time now (“most of your lives” about 18 years) i. This is called a trade deficit v. Equitable distribution of income 1. Not 1% controlling 99% 2. Not everyone the same 50. Indicators of the economy a. Nonfarm payroll i. Everyone who doesn't work on a farm 1. Released monthly a. Estimated (usually about 187K) i. If around estimate, nothing really happens ii. If below estimate, “doves” speak up iii. If above estimate, “hawks” speak up b. Unemployment rate i. “Want a job and don’t have one” 1. Released monthly a. Estimated (usually about 4.8%) i. If around estimate, nothing really happens ii. If below estimate, “doves” speak up iii. If above estimate, “hawks” speak up c. Average hourly wage i. Average wage of hourly workers (approx. 100M in U.S.) 1. Estimated (to go up or down in % August est. = increase 0.2%) a. If around estimate, nothing really happens b. If below estimate, “doves” speak up c. If above estimate, “hawks” speak up 51. The symbol of pi is used to represent price in economic symbols 52. Spending = income = value of production 53. The backbone of any advanced economy is the domestic consumer a. The United States is the backbone of the world economic system i. The middle class (domestic consumer) is the backbone of the United States economy 1. The middle class of the United States is the backbone of the world economic system 54. G7 Countries a. an informal bloc of industrialized democracies that meets annually to discuss issues such as: i. global economic governance ii. international security iii. energy policy 1. United States 2. Japan 3. Germany 4. Great Britain 5. Canada 6. France 7. Italy 55. BRIC Countries a. Countries which are which are all deemed to be at a similar stage of newly advanced economic development i. Great Britain ii. Russia iii. Indonesia iv. China 56. PIIGS Countries a. five Eurozone nations that were considered weaker economically following the financial crisis i. Portugal ii. Italy iii. Ireland iv. Greece v. Spain 57. Y = cash purchases 58. Lowercase cursive “i” = interest 59. Nondurable goods a. Food b. Short term i. Events 1. Concerts c. As income increases, consumption of nondurable goods increases d. Most consumer’s “budget” is spent here 60. Durable goods a. Long term i. “Long term economic benefit” b. “Big ticket items” i. Most people don’t pay cash 1. Borrow and make payments with interest c. Lasts longer than 2 years i. Cars ii. Houses iii. Furniture 61. Elvis Presley gave away 9 Cadillacs 62. Loan a. Borrowing money, pay back principal with interest 63. Interest rate(ir) a. Price you’re paying to access your future income today 64. Capital symbol in economics = “K” a. Das Kapital i. Karl Marx 65. Depreciation a. Losing value b. Capital consumption allowance (CCA) i. Amount that K goods depreciate 66. Boeing Assembly Plant a. Everett, Washington i. Largest factory in the world 1. Had to account for the curvature of the earth when building 2. Concrete is as thick as on runways a. No heating or air conditioning i. Concrete keeps it cool in the summer and warm in the winter 67. To get money to pay for a big project, businesses can a. Sell Stock (Equity) i. Pro does not introduce any costs ii. Con devalues current stock b. Borrow it (Debt) commercial paper i. Pro doesn’t hurt stock price ii. Con have to pay back with interest c. RE reinvesting profits i. Pro doesn’t hurt stock, doesn’t introduce costs ii. Con can take a LONG time to raise funds, can’t pay a dividend 68. Business a. Revenue comes in b. Expenses go out c. Profit is taxed 69. Depreciation = CCA a. CCA artificially increases expenses i. Lowers profit 1. Lowers taxes paid NOTES FROM E.S.I. 70. GDP a. Real GDP accounts for price changes while Nominal GDP does not b. GDP contains all real goods c. Must be produced domestically d. GNP would not count Toyota spending in the U.S. i. GDP does, but does not count for U.S. companies spending in Japan while GNP would e. Net Investment Income (NII) i. U.S. income earned overseas ii. Not counted into GDP f. GDP = C+I+G+(xm)NII 71. Net National Product (NNP) a. Same as GNP except the depreciation of capital goods is accounted for b. NNP = GNP CCA (capital consumption adjustment) 72. Consumer goods a. Nondurable good (y) i. Soft goods ii. Goods that don't last 1. food, drinks, clothes iii. C = (i+y) b. Durable goods (i) i. Cars, washing machines, jewelry c. Capital goods i. Durable items, separate from durable goods ii. Machinery iii. Have depreciation 1. Life expectancy 73. Business cycle (short run) a. Recession > expansion > recession > expansion 74. Consumer Price Index (CPI) a. Measure of overall cost of goods and services bought by a typical consumer b. CPI = (price of goods and services in current year / price of basket in base year) x 100 i. Substitutions 1. Different brand ii. Unmeasured quality change 75. Stapp facts a. Write down everything b. Dow Jones was at all time high c. Last December the fed raised interest rates by 25 basis points (0.25%) d. Since 1932 economics has been a big part of politics e. Jimmy Carter made the misery index = inflation rate (ir) + unemployment (u) f. “IT’S THE ECONOMY STUPID” Bill Clinton g. Social security started in great depression (FDR New Deal) h. State income tax in Texas is 0% i. Al Capone was arrested because of tax evasion j. Marijuana is the #1 cash crop in Oklahoma k. Temperature for a city is taken at the airport Hi Class! I'm an Elite Notetaker for StudySoup which means I'll be uploading detailed notes for this class all semester for anyone who needs it. I just uploaded my first set of notes. If you sign-up right now you can get them for FREE, and you'll get updates when I post new materials: https://studysoup.com/note/2307429/ua-econ-2013h-week-1-fall-2016 hope this helps! Winston 1) Plus1 a) Don’t just give your customer what they’re looking for, give them more i) Give more than what the professor asks 2) U.S. economy created 150k jobs in August, well short of 187k expected a) Prior 3 months averaged 231k 3) Unemployment was 4.9% instead of 4.8% expected 4) Private sector a) Nongovernment i) C + I 5) August numbers a) Food and service industry: +34k b) Social assistance: +22k c) Professionals: +23k d) Mining: 6k e) Manufacturing: 6k f) construction: 6k 6) Labor Force Participation Rate a) Total participating (employed + unemployment rate) / total eligible b) ALL TIME LOW IN THE U.S. c) In reality will always be below 100% d) Not looking for work = not unemployed 7) U6 Unemployment Rate a) 9.7% i) More accurate (better) than regular unemployment rate(UR) 8) U.S. Trade deficit a) About $40.44B per month i) $485.25B per year 9) Notable countries trade balances measured in billions of U.S.D, 2015 https://en.wikipedia.org/wiki/List_of_countries_by_current_account_balance a) China largest surplus i) +293.200 b) Germany 2nd largest surplus i) +285.200 c) Japan 3rd largest surplus i) +137.500 d) Brazil 3rd largest deficit i) 58.910 e) United Kingdom 2nd largest deficit i) 123.500 f) United States largest deficit i) 484.100 10)Ig(capital i, not lowercase L) a) Gross Fixed Capital Formation Gross investment Y = cash purchases i (cursive lowercase i when written) = interest rate K = capital x = exports m = imports + (above a letter when written, to the right of letter in these notes) = positive relationship (above a letter when written, to the right of a letter in these notes) = negative relationship i) CCA = Capital Cost Allowance 11)GNP = C(Y+,i) + Ig(i) + (x(Y+) m(Y+)) + G a) C = Consumption i) Domestic goods(i) ii) Nondomestic goods and services(Y+) b) Ig i) K goods ii) CCA iii) Inventories iv) Housing (i) c) (x m) i) Exports(Y+) ii) Imports(Y+) d) G i) Public (government) spending i. C + I = private sector ii. C + I + G = domestic sector iii. x m = foreign market iv. G = public sector v. C = Y(+) + i() vi. Y(+) = ND G&S vii. i() = DG viii.C = ND G&S + DG ix. Ig = i() x. i() = K goods + CCA + Inventories + Housing(i) 12)NNP a) Net national product 13)NNP = GNP CCA 14)Transfer payments a) a payment made or income received in which no goods or services are being paid for i) Such as a benefit payment or subsidy b) Transfer payments are NOT included in GNP 15)“Actual numbers are nice but they don’t mean much” a) “18!” i) This number by itself means nothing (1) 18 down from 19 the year before and 20 two years ago (a) This is what matters (i) The combination makes it a trend 16)GNP doesn’t include foreign companies inside the U.S. 17)CCA is not really spending a) Doesn’t make sense to include this when measuring the economy 18)BOJ a) Bank of Japan i) Japan’s equivalent of the U.S. Federal Reserve System (Fed) (1) Both are “Central Banks” (a) National banks 19)Japan has the most expensive land on the planet 20)Aichi Prefecture a) Japanese Prefecture i) Prefecture (1) A district under the government of a prefect (a) a prefect's office or tenure (b) the official residence or headquarters of a prefect b) Manufacturing hub of the world i) Population 7.263M 21)U.S. has a lot of “I Owe You”s a) Fed sells U.S. treasury bonds on the market i) Also buys them (1) Constantly going on 22)After WWII the U.S. was the only solid economy a) Everything (gold, oil, etc.) became expressed (quoted, current price) in U.S.D. i) U.S.D. worth more = gold worth more ii) U.S.D. worth less = gold worth less (1) How do you keep the value of gold the same? (a) Keep the value of the U.S.D. the same (i) How? 1. Fixed exchange rate iii) Fixed Exchange Rate System (19481973) (1) Kept the exchange rates between currencies the same (2) 360 Yen = 1 U.S.D. (3) Requires both central banks work to maintain (a) Fed had to “defend” the dollar(U.S.D.) (i) Bought them off the Foreign Exchange Market (FOREX) to keep the U.S.D. value consistent (b) By defending the dollar, the Fed put tendencies of recession into the system (i) <<See #23<< (still in this section, shift for space) 23)By defending the dollar, the Fed put tendencies of recession into the system a) THIS EXAMPLE ONLY USES JAPAN AND THE U.S. > SIMPLIFIED EXAMPLE > ACTUALLY MUCH MORE COMPLICATED b) The Fed made deals that people couldn’t refuse (offering $2100 for something worth $700) to get the other currency out there and get theirs off the market (increase value of theirs, less in circulation) c) Buying U.S.D d) Selling Yen (symbol for Yen = capital Y with two lines through the straight (bottom) line of the Y i) This caused: (1) Inflation in Japan (2) A trade deficit in the U.S. (to Japan) (3) A trade surplus in Japan (to the U.S.) (4) A lot of pressure for the U.S.D to fall (a) Would make everything cheap for other countries (b) <<See 24<< (still in this section, shift for space) 24)Japan doesn’t want U.S.D. a) Valued high now, but can fall, become worth less, worthless i) Because the U.S.D. was defended it had artificial value (1) “We want to be paid in gold” (a) Fed didn’t want to give up all the U.S. gold (i) Stopped defending the U.S.D. (ii) Japan stopped defending the U.S.D. 1. End of fixed exchange rate 1972 a. Value of U.S.D. dropped i. U.S. kept buying Japanese goods ii. Builds trade deficit iii. <<See #25<<(shift for space) 25)U.S. kept buying Japanese goods > deficit builds over the years (TREND) > 2016 a) Leads to jobs leaving the U.S. because of increased imports (instead of using own goods or exporting) i) U.S. tried to stop (1) Quotas (2) Tariffs (a) ^^Both of these cut off trade^^ (i) No free trade (ii) Imports require one of two things 1. Become more efficient > produce cheaper 2. Get out > find something else to do (b) Why are we buying imports? (i) We wanted them 1. No one forced us (ii) They were things we couldn’t produce b) “Floating Exchange Rates” i) Currencies constantly changing in value relative one another (1) Either (a) Appreciating (i) Gaining value relative another currency (b) Depreciating (i) Losing value relative another currency c) 1 U.S.D. = 120 Yen i) Everything is 66% cheaper in the U.S. than it used to be for Japanese companies > Japanese FDI in the U.S. (1) Foreign Direct Investment(FDI) (a) an investment in the form of a controlling ownership in a business enterprise in one country by an entity based in another country (i) Japan builds factories in the U.S. 1. Brings jobs back to the U.S. 2. <<See #26<< (same section, shift for space) 26)Japan builds factories in U.S. a) When America goes into a trade deficit with a country, those countries companies might want to relocate their production the U.S. because their currency appreciates relative the U.S.D. i) Everything in the U.S becomes cheaper for them than it used to be (1) Land (2) Labor (3) Avoid import tax (4) Shorter transportation (a) Toyota plants in Texas (b) MercedesBenz factory in Alabama (c) BMW factory in Carolina (i) ^^none of these would be counted in GNP^^ 1. they are FDI a. Why are they staying in the south? i. Northern labor is unionized ii. Much more expensive 27)Honda is pronounced “Honeda” a) Not “Hahnda” 28)Net Investment Income(NII) a) NII = income earned by U.S. firms overseas income earned by foreign firms in the U.S. 29)Stapp used to recruit for the Razorbacks (football) a) That’s where he saw the Alabama MercedesBenz factory 30)Gross Domestic Product(GDP) a) GDP = Gross National Product Net Investment Income i) GDP = GNP NII b) GDP = C + Ig + G + (x m) income earned by U.S. firms overseas + Income earned by foreign firms in the U.S. i) GDP = C + Ig + G + (x m) NII 31)Net investment a) Gross investment CCA b) Ig CCA i) Symbol = In ii) In = Net investment iii) In = Gross investment CCA (1) In = Ig CCA 32)Net Investment is COMPLETELY DIFFERENT from Net Investment Income 33)How many Japanese firms operate in Arkansas? a) About 15 34)How many Japanese firms operate in Texas? a) About 220 35)Why does Japan favor Texas? a) Population i) Cities b) People know where Texas is c) Possible illegal labor? d) Airports i) DFW ii) Houston (1) International airports e) Market i) Buyers f) Business hubs g) No income tax 36)San Antonio is the 7th largest city in the U.S. 37) CALCULATE ALL POSSIBLE CALCULATIONS AND EQUATIONS OVER THE WEEKEND U.S. Mexico X’s All to Mexico = 400 K good = 500 Durable Goods = 600 Transfer payments = 150 m’s all from Mexico = 300 Non Dur G&S = 100 Inc Earned by foreign in U.S. = 350 Housing = 700 Public Goods = 800 Inventories = 200 CCA = 100 Income earned by U.S. firms overseas = 250 Money supply = 450 i = 1% Calculate our every single thing you can Written the exact way he wrote it, in the order he wrote it, that’s all he wrote 1. What happened Friday? a. Fed person (big hawk) said to raise ir i. Not only in September but also in December ii. DOW dropped 400 points 2. Fed originally planned to raise ir four times this year a. Haven't done it once yet 3. What happened Monday? a. Fed person (dove) said to keep ir down i. Market recovered 4. What happened today? a. DOW back down 300 points b. POild is moving down 5. APCO Petroleum announced the purchase of $2B in land a. Issuing 35M in new stock i. Stock down 4% 6. Equations a. C i. Durable goods + nondurable goods b. Ig i. CCA + Inventory + Housing + KGoods c. Private Sector i. C + Ig d. Interest Sensitive Sector i. DG + Housing + KGoods e. Government i. 800 f. Domestic Sector i. C + Ig + G g. Foreign Sector i. x m ii. Same as net exports h. GNP i. C + Ig + G + (xm) i. NNP i. GNP CCA j. NII i. Income by U.S. firms overseas income by foreign firms in the U.S. k. GDP i. GNP NII l. NDP i. GDP CCA 7. 1973 a. No more fixed exchange rate b. Oil embargo 8. Goldilocks economy a. Right at potential GDP 9. Japan has had the most dips of any G7 Country since 1973 a. Five dips 10. 11. Trade surplus a. Your dollar strengthens i. You trade theirs 1. Buy yours back a. Cheaper to build there 12. Once people towed ice from Antarctica to aired countries in an attempt to give them water 13. China’s currency should be appreciating relative the USD a. China artificially depreciates it i. Causes domestic inflation 14. Who has the most FDI in the U.S.? a. Great Brittan 15. Mick Jagger a. Studied at the London School of Economics i. “I can’t get no utility” 1. “I can’t get no satisfaction” 16. 17. 18. The stock market is NOT our economy 19. The stock market does show how people feel 20. IMF a. International monetary fund i. Where countries go to get bailouts 1. Loans 21. Insolvency a. Bank cannot pay back its insuring obligations 22. Soluency a. Bank can pay back its insuring obligations 23. Cash a. Sterile asset b. Bank won't make money by just accepting deposit 24. Bank panic a. Main cause of economic downturn in 1800s b. Bank can't pay off the people who have deposits i. Everyone freaks out 25. When a bank runs out of money they go to the Federal Reserve a. Get a loan 26. When Venezuela runs out of money they go to the IMF a. Inflation rate (expected) in Venezuela for the next year is 720% i. 1 dozen eggs costs $150 27. Since 1930’s a. Banks have had to pay FDIC (deposit insurance) 28. FED is supposed to be a bank’s bank a. 15 years in they had a big catastrophe i. 5500 banks had to close 1. Great Depression a. FED has been putting money into the economy. Afraid to take it out because it might cause recession 29. Human’s first instinct when they see economic troubles is to save a. Causes the economy to go down 30. We have never had triple digit inflation in the U.S. a. Not even high double digit i. Worst ever was about 25% 31. Stagflation a. Economy is not growing i. And we have high inflation 32. Dual mandate a. Fed would try to promote high employment (low unemployment) and “acceptable” interest rates 33. Business Cycle a. Recurring fluctuations of economic activity 34. Inventory turnover a. How long it takes to sell one’s inventory i. Want a high ratio 35. o/p = output 36. (o/p) / worker = productivity 37. Increase in (o/p)/worker = increase in productivity = consistent goal 38. For pearson book if Stapp doesn’t work it out in class then don’t worry 1. Chapter 7 a. NBER i. National bureau of economic research 1. Research on economic trends, how to act to escape recession/avoid inflation/etc. ii. Three D’s 1. Depth a. How bad i. 1,000,000 vs 40,000 2. Duration a. How long has the trend been occurring i. Month to month or half a year/year 3. Dispersion a. What’s relevant i. Unimportant industry doing terrible but important industry doing good is alright 1. Great Depression = manufacturing & banking b. Precise answer i. Expansions between a trough and a peak 1. Norm for most advanced countries a. Trending upwards long term i. Healthy cycle of trough and peak 2. Chapter 8 Capital Wealth and Inequality a. Karl Marx wrote Das Kapital i. Why is capital abbreviated using a “K” b. Thomas Picketty i. Wrote Capital in the TwentyFirst Century c. Poverty rates in America d. Income mobility i. Lifespan 1. Younger > less skilled > any unskilled job > after college > stay in a generalish area > don’t switch job every year 2. Luck is a factor 3. Chapter 9 The Great Stagflation a. Stagflation i. Stagnation ii. Inflation 1. Economy isn’t booming but there is still inflation b. 20012006 Housing Bubble i. Growing at such a fast rate that people built A LOT 1. Economy didn’t keep growing as expected c. The deeper the recession the harder it is to recover i. Economic safety net is usually the government 1. Make programs 2. Spend more d. GDP i. Gross domestic product 1. Only concerned about borders a. Only companies that operate within the borders are counted e. GNP i. Gross national product 1. Concerned with nationality of company f. To take net of either GDP or GNP making NDP or NNP i. Take out net investment g. GDP = C+I+G+(xm)NII h. Investment(I) i. Housing ii. Inventory i. Government Spending(G) i. Transfer payments 1. Food stamps 2. Social security 3. Welfare a. Not counted in GNP or GDP j. Earned income tax credit i. People who meet certain requirements can apply to get taxes back 1. Typically people who have: a. Low incomes b. Big families 4. Chapter 10 The Case of the Disappearing Workers a. Unemployment Rate i. The percentage of the total labor force that is age 16 or older, but not institutionalized or in school, and actively seeking employment, but has not found it 1. College students looking for job aren’t counted 2. 15 year olds looking for job aren’t counted b. Discouraged Workers i. Not accounted in unemployment rate 1. People give up and stop looking for jobs c. Labor supply curve i. Expect it in class, probably not any time soon 5. 9 times of 10 you WON’T use money supply in calculations
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