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Unit 2 measuring the economy (macroeconomics (goals (promote economic…
Unit 2 measuring the economy
macroeconomics
purpose
measuring the health of the whole economy
guide government policies to fix problems
goals
promote economic growth
GDP
definition
goods and services not included
intermediate goods
i.e. the components of the car
non-production transactions
used goods
financial transactions
non market and illegal goods/services
household
monetary value of all the finished goods and services produced within a country´s border within one year
calculation
two ways
expenditures approach
add up all spending on finished products and services under one year
GDP=C+I+G+(X-M)
Consumer
Investment
Goverment
eXport
iMports
the income approach
add up all the income resulting from selling finished goods and services under a given year
Income=+W+ir+PR
factor payments
2 more items...
types
nominal GDP
do not account for inflation
real GDP
does account for inflation
the business cycle
peak
trough
phases
recovery (expansion)
recession (contraction)
gaps
difference between full employment and real GDP
inflationary gap
recessionary gap
limit unemployment
unemployment
workers that are actively looking for a job but aren´t working
the unemployment rate percent of people in the labor force who want a job but are not working
types
frictional
temporal in between jobs
qualified with transferable skills in demand
instances
seasonal unemployment
structural
changes makes skills obsolete
workers don not have transferable skills that are in demand, workers needs to aquire new skills to get a job
example
truckers automatization
instances
technological unemployment
cyclical unemployment
unemployment caused by a recession
natural rate of unemployment (NRU)
frictional + structural
full employment output (Y)
The real GDP created when there is no cyclical unemployment
keep prices stable
concepts
inflation
types
deflation
effects
people will hoard financial assets (money)
decreased consumer spending and GDP
decrease in general prices a negative inflation rate
inflation
effects
higher interest rates, more expansive to borrow
winners and losers
unanticipated inflation
2 more items...
is rising general level of price and it reduces the purchasing power of money
disinflation
prices increasing at a slower rate
measuring
two ways
the inflation rate
percent change in prices year to year
prices indices
types
2 more items...
causes
the government prints too much money
quantity theory of money
velocity of money
1 more item...
M
V =P
Y
5 more items...
Demand - pull inflation
too many dollars chasing to few goods
cost-push inflation
higher production costs increase prices
wages
nominal
wage measured by dollars rather than purchasing power
real
wage adjusted for inflation