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Key Variables in the Economy - Coggle Diagram
Key Variables in the Economy
Real GDP is a way to gauge the economy's economic prosperity and growth.
Gross Domestic Product is used to measure the economy. It measures the total income earned in an economy and the total expenditure of an economy's output of goods and services.
Productivity
Productivity is the quantity of goods and services produced from each unit of labor input
Human Capital - The knowledge and skill workers acquire through education, training, and experience.
Human Capital - The knowledge and skill workers acquire through education, training, and experience.
Physiical Capital - The stock equipment used to produce goods and services
Technological Knowledge - the understanding of the best ways to produce goods and services
Elements that contribute to a country's long-run economic growth.
Savings and Investments - helps the economy grow by saving more scarce resources from consumption to invest in more resources to produce goods and services.
Education - schooling and training.
Health and Nutrition - a healthy workers are more productive.
Property Rights - the ability of people to exercise authority over resources they own.
Free Trade - free trading of a country imports and exports within the free trade market.
Research and Development - extensive experiments and studies to develop new technologies and ideas for better and more productivity.
Population Growth - a large population may help the economy because more people lead to more production and progression in technology. However, more people can stretch natural resources because there is more consumption. In addition, the reduction in GDP growth can force capital stock to be spreaded thinly.
Financial Markets- The institutions used for firms and individuals to save and invest their money.
The Stock Market - represents ownership in a firm. Claims to the profits that the firm makes.
The Bond Market - The purchase and sell of bonds. A bond is a certificate of indebtedness that specifies the obligations of the borrower to the holder of the bond.
Banks - a bank takes take deposits from people who want to save and use these deposits to make loans to people who want to borrow.
Mutual Fund - an institution that sell shares to the public and uses the proceeds to buy a selection or portfolio, of various types of stocks, bonds, or both stocks and bonds.
The National Income Accounts
The national income accounts use accounting to add up the earnings and expenses of the economy.
GDP - Y = C + I + G + NX
Savings and Investments have to equal the same amount. S = I
National Savings - the total income in the economy that remains after paying for consumption and government purchases. Y = C - G = I
Private Savings - the amount of income a household have after paying taxes and for their consumptions.
Public Savings - the amount of tax revenue the government has left after paying for its spending.
Budget Surplus - if the government spends more than it receives in tax revenue.
Budget Deficit - if the government spends more than it receives in tax revenue.
The Market for Loanable funds is where savers go to deposit their savings and borrowers go to take out loans.
Savings is the source of supply of loanable funds.
Investment is the source of the demand for loanable funds.
Measuring the Time Value of Money
Present Value- the amount of money today that would be needed, using prevailing interest rates to produce a given future amount of money.
Future Value - the amount of money in the future that will yield, giving prevailing interest rates.
Compounding the accumulation of a sum of money in a bank account where the interest earned remains in the account to earn additional interest in the future.
Managing Risk
Risk Aversion - a dislike of uncertainty
Markets for insurance - People buy insurance to cover them from risks that cause damage.
Diversification of firm - Specific Risk - the reduction of risk achieved by replacing a single risk with a large number of smaller unrelated risks.
Some individuals accept risk for the trade-off of a greater gain from the possibility. If there is a large pay off the risk is worth it.
Unemployment
The economy's natural rate of unemployment refers to the amount of unemployment an economy usually experience.
Unemployment is measured by the unemployment within the labor force.
To get the unemployment rate divide the number of unemployed individuals by the labor force and multiply it by one hundred.
To get the labor force participation rate divide the labor force by the adult population and multiply it by one hundred.
Unemployment is inevitable because of frictional unemployment. Frictional unemployment is the length of time between when a person finds a job that suits them.
Structural Unemployment - when the quantity of labor supplied exceeds the quantity demanded.
Unemployment Insurance is a government program designed to offer workers partial protection against job loss.
Minimum - Wage is another way the government protects labor workers from being paid unfair wages compared to the cost of living.
Unions are good for protecting labor workers by protecting, pay, and work conditions.
Collective Bargaining - a tool unions use by coming together with firms to agree on the terms of employment.
Strike is an organized withdrawal of labor from a firm by a union .
Efficiency wages are paid by firms to increase worker productivity.
Worker Health
Worker Turnover
Worker Quality
Worker Effort.