Test 1 Study Guide Part 1
Test 1 Study Guide Part 1 ECON 1010
Popular in Principles of Economics: Macroeconomics
Popular in Economcs
This 6 page Test Prep (MCAT, SAT...) was uploaded by email@example.com Notetaker on Monday February 29, 2016. The Test Prep (MCAT, SAT...) belongs to ECON 1010 at University of Tennessee - Chattanooga taught by Ziad Keilany (P) in Fall 2015. Since its upload, it has received 87 views. For similar materials see Principles of Economics: Macroeconomics in Economcs at University of Tennessee - Chattanooga.
Reviews for Test 1 Study Guide Part 1
Report this Material
What is Karma?
Karma is the currency of StudySoup.
You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!
Date Created: 02/29/16
Macroeconomics Test 1 Production Possibility Curve Pg. 17 Capitol: physical instruments of production Factors of production: 4 economic resources: land, labor, capital, and entrepreneurial ability. Gross (private) domestic investment: Expenditures for newly produced capital goods (machinery, equipment, tools, and buildings) and for additions to inventories. Transfer payment: a payment of money (or goods and services) by a government to a household or firm for which the payer receives no good or service directly. Demand – Pull inflation: increases in the price level (inflation) resulting from increases in aggregate demand. Cost – Push inflation: increases in the price level (inflation) resulting from an increase in resource costs (for example raw material prices) and hence in perunit production costs; inflation caused by reductions in aggregate supply. Pg. 17 Production Chart Difference between nominal income & real income Nominal Income: the number of dollars received by an individual or group for its resources during some period of time. (income expressed in dollar terms) Real Income: the amount of goods and services that can be purchased with nominal income during some period of time; nominal income adjusted for inflation. (nominal income adjusted for inflation) For example, when you borrow $100, 000 for 6 months and you're given a nominal interest rate of 5% per annum (rates are usually nominated on a per annum basis), that per annum rate is the nominal rate. Your actual interest expense is $2,500 for that 6 months. Your actual/real interest rate is therefore 2,500/100,000 * 100 = 2.5%. Difference between good & service. Include examples and be able to answer questions like “what is a good in this situation” “what is a service in this situation” and identify Good – merchandise; and article of trade; a manufactured item offered for sale to customers. Service – an act or use for which a consumer, firm, or government is willing to pay. Investment – spending for the production and accumulation of capital and additions to inventories Business Cycle: recurring increases and decreases in the level of economic activity over periods of years; consists of peak, recession, trough, & expansion phases. Peak: business activity has reached a temporary max the price level is likely to rise during this phase Recession: period of decline and total output, income, and employment. Trough: output and employment bottom out at their lowest level, could be short or long. Expansion: a period in which real GDP, income, and employment rise. Consumer Price Index (CPI): an index that measures the prices of a fixed “market basket” of some 300 goods and services bought by a “typical” consumer. Calculating rate of inflation: ((CPI 2015 – CPI 2014) / CPI 2014) X 100 = rate of inflation So if exactly one year ago the Consumer Price Index was 178 and today the CPI is 185, then the calculations would look like this: ((185178)/178)*100 Positive statement – factual Normative statement – opinion based Consumption fixed capital – depreciation Okun’s Law: Generalization that any 1percentagepoint rise in the unemployment rate above the full employment rate of unemployment is associated with a rise in the negative GDP gap by 2 percent of potential output (potential GDP). Scarcity – resources we use to produce when goods & services are limited. Peeks, Troughs, & Recoveries Shift in production possibilities curve: Shift to the left = economic crisis Shift to the right = Unobtainable Calculate rate of employment: (Number of employed people/Total labor force) X 100 = rate of employment Calculate rate of unemployment: Unemployed/(Employed + Unemployed) = rate of unemployment Operational side of investment: 2 sides Gross Domestic Product: The total market value of all FINAL goods and FINAL services produced annually within the boundaries of a nation. How many sides are there for GDP? – Expenditure & Income Income approach: Compensation of employees + Rents + Interest + Proprietors Income + Corporate Profits + Taxes on production & imports = National Income – Net foreign factor income + consumption of fixed capital + statistical discrepancy = GDP Expenditures Approach: Personal consumption expenditures + Net/Gross private domestic investments + Government purchases Net exports + Consumption of fixed capital GDP = C + G + Ig + X – M CFC: Consumption of fixed capital Xn C: Consumer spending – durable, nondurable, & services G: Government Purchases Ig: Gross Domestic Private Investment X: Exports M: Imports Xn: Net Exports Microeconomics: Focus on business Macroeconomics: Focus on country Multiple Counting: when determining GDP, you only include the market value of all final goods and services. Principle behind production possibilities curve: graphic representation of alternative production possibilities facing an economy. Total productive resources of the economy are limited. The economy has to choose between different good and decide which food should be produced more or less. Calculate labor force: Population of Economy – Ineligible workers (workers 16 yrs old) – unemployed (people looking for worker) = Labor Force Calculate unemployment rate: (Unemployed (workers looking for work) / labor force) X 100 = unemployment rate Natural rate of unemployment Definition of investment in economics, capital goods, all construction, changes in inventory, research & development Calculating Net Investment National income accounting problems Pg. 566 & 567 problems 4, 5, & 7 National Income (NI): Net domestic product – Statistical discrepancy + Net foreign factor income = NI Calculate rate of saving & spending of consumer goods Disposable income: Personal Income – Personal Taxes = Disposable Income Net foreign factor income Calculating rate of inflation Calculating depreciation and & consumption of fixed capital Opportunity cost: the things you have to give up Production possibility curve – straight line method Economic perspective: Scarcity Choices Opportunity Cost Scarcity of Resources Cyclical unemployment: a type of unemployment caused by insufficient total spending (insufficient aggregate demand)vand which typically begins in the recession phase of the business cycle. Principle of production possibility curve: Scarcity Choices Opportunity Cost Scarcity of Resources Full Employment, Fixed Resources, Fixed Technology, Two Goods Change in inventories = change in unplanned inventories Definition in inventories: Investments Consumer: Government: Investment: Resources: anything of a value Labor to produce Land to build & extract Capital Entrepreneurial talent
Are you sure you want to buy this material for
You're already Subscribed!
Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'