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Is interested in understanding global phenomena such as economic growth, economic cycles, unemployment, inflation and international trade, among others.
Economic Growth
Phillip’s law
In general, countries that have a larger investments in capital goods are wealthier and have economic growth rate.
_____- a symptom of disequilibrium where aggregate output < aggregate demand
__________- persons in the labor who are working but are not working all the hours they are willing and able to.
Accurately explains history
Natural Rate of Unemployment - consistent with frictional, structural, and seasonal unemployment.
The market value of final goods and services (i.e., sold to final consumers) produced by a nation during a specific period, usually 1 year.
Another problem with the unemployment rate as a measure of overall labor activity is that the employed may not be working as much as they would like
If there is no technical progress, the output per capita will be on its growth level.
A market is in _______ when the quantity demanded is equal to quantity supplied at the market price.
Business cycle refers to the physical output of the economy or _____.
A severe recession in both scale and duration is called _____.
In exchange rates,_____ means that they fluctuate day to day according to the market.
GDP Deflator = Nominal (current-dollar) GDP /Real (constant-dollar) GDP * 100
According to __________, that if more of the time is spent in one activity then you must invest your resources to develop specialized tools or machines to aid me in my task.
Price Stability
_______ is declining economic growth and growing unemployment.
In methods of measuring aggregate output, ___________ is the amount of spending by the final purchasers of output.
Inflation = Increase in average level of prices
Money is a common medium of exchange and represents the general purchasing power.
_________ is the change in production that occurs when all resources are proportionately increased (increased by the same percentage).
____________ a graph that indicates all possible combinations of two goods or services that can be produced within an economy given the full and efficient use of all available resources.
A _______ is the opposite situation of a price ceiling.
The _______ is a graphic representation of the market demand schedule and the Law of Demand
Percent Change in (P x Q) = (Percent Change in P) + (Percent Change in Q)
Quantity of goods and services that can be purchased with a given amount of money.
The test of a proposition or theory using actual observations or numbers is
Production is a function of the economy's use of capital, K, labor, L, and a multifactor productivity index, A.
Real GDP - value of total output corrected for any changes in prices. Also referred to as "constant-dollar" GDP. Real GDP is reported quarterly by the Bureau of Economic Analysis
Nominal GDP =Value of output measured at actual prices (current dollar output). Does not correct for inflation
Percentage increase in the average level of prices is called ___________.
GNP
Percentage decline in the average level of prices.
Last year you were paid Php 470 per day as office employee. This year you received a Php 25 per hour raise. By what percentage did your rate increased?
Consumer Price Index=Only goods and services purchased by households included Quantities fixed (the market basket) Imports (of consumer goods) included.
GDP Deflator = All final goods and services included. Quantities variable. Imports excluded.
___________ is a legal requirement that maintains the market price below the equilibrium price.
Goods and services those are scarce. There is an opportunity cost involved in their use or consumption.
Real GDP =Value of output based on prices of some base period ("constant" dollar output) eliminates effect of inflation.
Production Costs = opportunity costs of resources required (e.g., cash costs) to change prices.
What are the Three (3) Macroeconomic Goals?
Analysis of the behavior of an economy as a whole is ___________.
__________ is also referred to as a direct relationship. As the value of X increases, the value of Y increases.
The _______ is one of the central issues in macroeconomic theory and provides the starting point for understanding the complex relationships between the various measures of macroeconomic performance and the role of government economic policy.
_____- Aggregate Output (or National Income), Y = Aggregate Demand, AD
A period of decline in total output, income, employment, and trade, usually lasting from six months to a year.
__________is the measure of the average level of prices for some specified bundle of goods and services, relative to the prices in a specified base year
Real GDP - value of total output corrected for any changes in prices. Also referred to as "constant-dollar" GDP.
__________as the price of a good or services increases, the quantity you would be willing and able to purchase during some period of time declines.
____________________ is measured by the money (dollar) value of all final goods and services produced byan economy during a given period of time, usually a year.
__________as the shift of the supply curve in response to a change in one of the variables assumed to be held constant under the ceteris paribus assumption (e.g., technology), holding the good's price constant.
______________ is the characteristic of money or currency where it can be used as a medium of exchange for any good or service.
Unfortunately the unemployment rate is not a perfect indicator of economic activity or inactivity because ___________________.
Nominal interest rate - expected rate of price inflation.
A country should specialize in a good in which it has comparative advantage.
When the amount that the quantity demanded exceeds the quantity supplied when the market price is below the equilibrium price.
Production is a function of the economy's use of capital, K, labor, L, and a productivity index, A.
Contraction
Real GDP= Current year Quantities x Current year Prices
Common characteristics in each of the relationship of two variables is that the change in independent variable X produces a change in dependent variable Y and represented in a math equation.
Economic growth is the change in aggregate real GDP or average real GDP per person over time.
If price is above the equilibrium price, what causes it to return to the equilibrium level? If it is below equilibrium, what forces it up?
Exchange rates can be fixed or floating.
_______- key economic statistics that provide information about business cycles and trends in overall economic performance.
If a person produces more than a person can be presumed to consume more so is wealthier or richer.
The inverse relationship between inflation and unemployment is illustrated using the _______.
An empirical study is a test of a hypothesis or theory using actual data
Hyperinflation is generally caused by governments printing money to finance large fiscal deficits caused by wars, revolutions, the establishment of new states, or exorbitant social programs.
_____ - government deficits do not affect the overall level of demand in an economy. Taxpayers expect that any increase in the deficit now must be repaid later and increase their savings in anticipation.
Population & wealth, Savings & wealth, Rich & Poor and Convergence, Consumption & the Golden Rule
Deflation Rate = Price Index Year 2 - Price Index Year 1 /Price Index Year 1 * 100
__________is the amount that the quantity supplied exceeds the quantity demanded when the market price is above the equilibrium price.
Transportation cost
___________is the quantity of goods and services that can be purchased with a given amount of money; the value of money
__________- percentage rate of increase in the price index per period.
Pro- cyclical
___________ = Labor Force / Civilian Non institutional Population * 100
___________ is nominal wage corrected for the average level of prices.
The GDP Deflator is described as a variable-weight price index (also referred to as a Paasche price index)
Frictional Unemployment - stable labor force in an unstable economy. Unemployment that results from a decline in aggregate economic activity.
Understanding measures of Elasticity is critically important in Microeconomics, references to Elasticities are infrequent in Macroeconomics
The principle of Occam's Razor -cut away all the complicating details that do not significantly contribute to the reliability or validity of a model.
Based on the percentage you got above. If the average inflation rate last year was 8%, are you better or worse off?
__________ is an advantage of a person who can produce a good or service with fewer resources than another person.
_____ an increase in government debt is accompanied by an increase in the foreign trade deficit (imports exceeds exports)
___________ a legal requirement that maintains the market price above the equilibrium price.
Political Science is the study of mankind in the ordinary business of life.
__________________ - the market value of final goods and services (i.e., sold to final consumers) produced by a nation during a specific period, usually 1 year.
_________ is the real value of the quantity of goods and services consumed by the average person, typically measured as average real GDP per person, per worker, or per family.
Percentage increase in the average level of prices.
Intangible but useful activities that are valued by people.
____________ is the change in the quantity of total output resulting from a unit change in a variable input, keeping all other inputs unchanged.
When the government increases money supply faster than the economy is growing you generally end up with deflation.
The _____ suggested that standards of living of the poor and wealthy countries should converge on each other.
Price Index = current-year total cost of market basket of goods and services / base-year total cost of market basket of goods and services
_________ is the change in the quantity of total output resulting from a unit change in a variable input, keeping all other inputs unchanged.
The Ceteris Paribus assumption is of critical importance.
Endogenous growth theory, first developed by _____
Microeconomic demand and supply curves depend on differences in ________ prices
What do you call the hours (not rendered) beyond government mandated 40 hour work week
__________is the price at which the quantity demanded is equal to the quantity supplied. Other things being unchanged, there is no tendency for this price to change.
Tangible things that satisfy people's wants and desires.
______ Latin term that used in economics means all other non-price factors that affect the amount we consume or produce do not change.
Macroeconomics is analysis of the behavior of an economy as a nation.
A primary measure of the health and welfare of an economy is the growth rate of real GDP, or total physical output of the economy
Increase skill from repetition
Direction of Movement
_________ = Total employed + total unemployed.
Demand-Pull Inflation - caused by an increase in aggregate demand for goods and services.
_____ is a function of the economy's use of capital, K, labor, L, and a multifactor productivity index, A.
_______- an economic indicator that changes after the overall economy has changed. Examples include investment spending, the unemployment rate, and interest rates.
___________ Unemployment is associated with a stable labor force in a dynamic economy
A market is in ______________ when the quantity demand is equal to quantity supplied at the market price.
A _______is a collection of suppliers and consumers engaged in trade.
It is comparative advantage or opportunity cost and not absolute advantage that yields an incentive for specialization and trade.
Compute for the employment rate (in percentage)
___________ = (Number Unemployed / Labor Force) * 100
The empirical test would involve entering economic growth rates for selected countries in a spreadsheet and statistically comparing growth rates for those two groups of years.
Real Interest Rate
In law of demand and supply:Why is the price of gasoline usually higher than the summer and Christmas vacation than in ordinary months?
The price of one currency in terms of another currency.
_____- government deficit spending reduces private investment spending
In exchange rates,_____ means that they stay at the same value as set by the government.
Comparing growth rates across countries is not a problem despite differences in currencies because growth rates are _____ of the units of measurement.
____________________the amount by which the value of a firm's finished products exceeds the value of goods and services the firm purchases
Nominal Interest Rate
The best available economic measure of quantity is _________.
Real GDP may not be a perfect indicator of our well-being because it ignores some of the unmeasured benefits and costs of our behavior that we discussed in the earlier chapter on GDP accounting. But it is the best indicator that has been consistently measured over time.
Timing
What are the two different ways that the quantity of purchases of a good can change?
A legal requirement that maintains the market price below the equilibrium price.
A growth rate is simply the amount of increase or decrease divided by the starting level.
_____ simply means that if the labor force grows at 2% per year and capital grows at 2% per year (the capital-labor ratio in this steady state model is constant) then output also grows at 2% per year.
True or False: NX = X - M or Net Exports= Exports - Imports
Which of the following statements are positive in nature and which are normative?
__________ Unemployment is associated with business cycles and, more particularly, with temporary downturns in the economy
Gross National Product (GNP) = C + Ig + G + NX
An increase in income leads to an increase in demand (the demand curve shifts to the right).
The fundamental method of exchange is ____________.
Exchange Rate refers to the quantity of currency in circulation.
When the amount that the quantity supplied exceeds the quantity demanded when the market price is above the equilibrium price
_______ is the point at which a contractionary phase ends and an expansionary phase begins.
Absolute Advantage
Determine what it would cost to purchase the quantities of goods and services in the market basket in some year identified as the base year.
____________ is when we specialize and both benefit after the exchange
____________ cannot be used in empirical analysis.
Consumer Price Index (CPI) includes
___________ relates to the effect that a small or unit change one variable has on another variable.
___________, as more scarce resources are used to increase production of one good or service, production of another good or service falls by larger and larger amount.
____________ is the real value of the quantity of goods and services consumed by the average person, typically measured as average real GDP per person, per worker, or per family.
Neoclassical growth model pioneered by Denison
_______ - an economic indicator that changes before the economy has changed. Examples include new orders for capital goods, building permits, unemployment insurance claims, and stock prices.
The production possibilities curve is often referred to as a ___________.
____________consists of transactions that are not documented for various reasons.
Indivisibility is when some goods can be broken into small tradable quantities.
Recurrent, systematic fluctuations in the level of business activity, often characterized by changes in growth rate of real GDP.
A shift of the demand curve in response to a change in one of the variables assumed to be held constant under the ceteris paribus assumption (e.g., income), holding the good's price constant.
The ___________ presented a menu of policy trade-offs
Analysis of the behavior of an economy as a whole.
A recession that is major both in scale and duration.
_____ is measured by comparing the amount of goods and services produced with the factors (e.g., capital and labor) used in production.
The market interest rate that is paid by borrowers to lenders.
______________ - average output per hour of labor (e.g., total real GDP divided by the total number of labor-hours worked)
What kind of resources in which examples are petroleum, natural gas, coal, and nonfuelminerals extracted from the ground is included in GDP in the products produced from them
Contribution of increase in labor to the growth in output is the most important.
The market value of final goods and services produced by labor and property supplied by the residents of a nation during a specific period, usually 1 year.
_________ is the amount of labor supplied by individuals at a given real wage rate.
The unemployment rate is negatively related to changes in the growth rate of real GDP. Moreover, output fluctuates more than unemployment over the business cycle.
_________ cannot be used in empirical analysis.
__________ proposes that the microeconomic labor-supply demand model is not oneof simply workers, but the supply and demand of efficient workers
_______ is the point at which an expansionary phase ends and a contractionary phase begins.
Things that are available in sufficient amounts to satisfy all possible needs. There is no opportunity cost involved in their use or consumption.
The point where the curve crosses the vertical axis is referred as ____________.
What approach that measures total economic activity by adding the amount spent by allultimate or final consumers of products and service?
One of the Macroeconomic objectives is to develop better laws and government policies to maximize welfare of the society.
_____________ unemployment arising from frictional, structural, and seasonal unemployment, further as described as the unemployment rate that coexists with macroeconomic stability.
Expenditure approach categories are;
__________ is described as a fixed-weight price index (also referred to as a Laspeyres price index), which measures the cost of a fixed basket of goods relative to a base period
Peak
Artificial barriers of Trade
A line showing X and Y pair is referred as ____________.
The Purchasing Power Parity exchange rate will often differ from the actual exchange rate.
Makes reasonable predictions about the future
Expansion
The _____ test would involve entering economic growth rates for selected countries in a spreadsheet and statistically comparing growth rates for those two groups of years.
Seasonal Unemployment - stable labor force in a dynamic economy with mismatch between skills of labor and skills demanded.
_____- recurring patterns of economic expansion, then contraction, then expansion again.
Disposable income to national income formula where,
_____ applied the concept of declining returns when he conjectured in 1798 (An Essay on the Principle of Population) that the world population would eventually outgrow the capability to produce food.
Ceteris paribus, means
Net Domestic Product (NDP) = C + In + G + NX = GDP - depreciation
Comparative advantage
Complementary and Conflicting Goals
Neoclassical growth theory explains that output is a function of growth in factor inputs especially on capital, labor and technological progress.
Negotiation cost
_________ is a very small increase of decrease in the quantity of some variable.
The __________ is a graphic representation of the market supply schedule and the Law of Supply
Unemployment Rate (percent) = Unemployed/Total Labor Force * 100
_________ represents a combination of percentage change and marginal analysis.
Incentive to invest resources in developing specialized tools
An increase in income leads to a decrease in demand (the demand curve shifts to the left).
Is the number of unemployed individuals divided by the total of those employed and unemployed total labor force.
___________ is the amount of labor demanded by firms at a given real wage rate.
Floating means that exchange rate is steady or constant in day to day basis according to the market.
Solution: always use the previous year as the base year. Individual year deflators are "chained" (multiplied) together to produce the GDP deflator.
Nominal GDP= Current year Quantities x Base year Prices
Aggregate demand is equal to consumption plus investment plus government spending plus net exports as shown in equation. where,
In comparing growth of countries as to levels of output or income across countries we run into the problem of differences in currencies
Equilibrium in the labor market occurs where the aggregate quantity of labor supplied equals the aggregate quantity of labor demanded
Participation Rate (percent) = Total Labor Force/Civilian Population * 100
When many suppliers and many consumers (competitive) engaged in trade without interference from government (free).
Y = A * f(K, L ) is the formula used to measure _____.
In Demand Curve Shifts, a change in any of these will cause the demand to curve shift to the right or left, when the demand curve is shifting to the right. The rightward shift is called ___________________.
Opportunity cost is:
Compute the opportunity cost , where 10 mobile phones is to 5 Simcards.
Structural Unemployment - unemployment that results from the normal seasonal change in aggregate economic activity.
Trough
We can represent a single person's decision about how many items to purchase over a year in a table called a _______.
_______ increasing economic growth and price inflation.
Okun’s law
What is the value of total output (nominal GDP) corrected for any changes in prices.
GDP
Percent Change in (Q/L) = (Percent Change in Q) - (Percent Change in P).
Law of Demand Ceterus Paribus
__________ is when many suppliers and many consumers engaged in trade without interference from government.
When the average level of prices increases over time the economy is said to be experiencing _______________.
What are the steps in solving macroeconomic equilibrium model solution method?
The overall goal of government economic policy is to promote economic _____.
GDP Per Capita
___________ is also known as the Implicit GDP Deflator or Implicit Price
The short-term fluctuations in economic activity we see are called business cycles.
Growth models focus on the long-run trend in output, more commonly called potential or full-employment output, rather than the short-run booms and busts in which an economy cycles around its long-term trend.
___________ as the price of a good or service increases the quantity you would be willing and able
Percentage of Change = ending value- starting value /starting value x 100.
_____________________- the market value of final goods and services produced by labor and property supplied by the residents of a nation during a specific period, usually 1 year.
Economic growth is
Cartesian coordinate system is not the usual graphical representation.
Opportunity cost.
The selected goods and services is called the food basket.
Economists use the term "business cycle" to refer to:
Economics is not an exact science.
Analysis of the behavior of individual decision-making units (individuals, households, firms).
Under Implications of the model, a change in the government deficit can affect the following variables, what are these three variables
_____- a symptom of disequilibrium where aggregate output > aggregate demand
Condition that savings is equal to investment
Employed Persons - persons 16 years and over who had no employment during the reference week, were available for work, except for temporary illness, and had made specific efforts to find employment sometime during the 4-week period ending with the reference week.
__________ a variable that depends on the value of the independent variable(s) can be seen in the left side of the equation.
During an economic recovery phase where real GDP is _____ it is quite possible for the unemployment rate to increase through changes in frictional and structural unemployment.
Independent variable can be seen in the _______________ of the equation.
Counter cyclical
Investment is equal to the change in the capital stock plus depreciation.
Recession is
What theory goes beyond explaining specialization by individuals to justify why macroeconomics also specialize and engage in trade ?
Employed persons + Unemployed persons = Natural Rate of Unemployment
The disposable income (net pay after taxes) a household receives can be disposed of in one of two ways: consumption or savings. where,
___________ by definition equal to the change in the capital stock plus depreciation.
The following are the categories of government policies designed for long term economic growth except,
The slope of a curve can be determined from a graph by dividing the vertical change in the Y variable or rise by the horizontal change in the X variable or run.
______________ is a movement along a fixed supply curve in response to a change in the price of that good, ceteris paribus (everything else unchanged).
___________if a person can produce a good or service with lower opportunity cost than can another
Transfer Payment - a payment made for which no goods or services are provided in return. Transfer payments are excluded from _______.
___________is the amount that the quantity demanded exceeds the quantity supplied when the market price is below the equilibrium price.
When the average level of prices declines, this is called _________.
During economic contractions, when output is falling, the inflation rate also declines.
___________ is a term used to denote a very high rate of inflation.
___________ is referred to as the ceteris paribus assumption
___________ is the increase in total cost from the production or consumption of one additional unit of a good or service.
Aggregate real GDP is of limited use because it does reveal whether the residents of a given country are better or worse off.
____________ is the change in production that occurs when all resources are proportionately increased (increased by the same percentage).
The key theoretical advances that ___________ made were that changes in money supply and peoples' expectations can lead to any possible combination of unemployment and inflation.
Accurately describes historical outcomes, and It must make reasonable predictions about the results of future observations.
Reduced time wasted shifting between tasks
The curve slopes upward and to the right of the origin and also referred to as a direct relationship is called ___________.
Labor is a service that is supplied by individuals and demanded by firms.
Net Investment (In) = Gross Investment (Ig) - Depreciation
_________ is the level of output at which the labor market is at its natural rate of unemployment.
Low Unemployment
____________ is a condition of constant rates of growth in economic measures. With no technological change and is represented by identical constant growth rates in the labor force, total output, and the level of capital.
________ represent a cost to not only individuals but also the macroeconomy or reduce overall economic efficiency in that they represent an unnecessary cost of transforming resources into final goods and services.
_______ the unemployment rate is negatively related to changes in the growth rate of real GDP. Moreover, output fluctuates more than unemployment over the business cycle.
When the price of resources in the production process increases, firms try to pass on these increases to the product price this is called ________.
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