Exam1

consumption, investment, government purchases, and net exports

products purchased by the typical consumer

willingness to buy

increase in government borrowing

falls

False

True

True

- for countries playing catch-up with countries that already have high real GDP per capita  - for relatively poor countries if the convergence hypothesis holds true  - if the country is able to benefit from adopting the technological advances already used in advanced countries 

False

True

True

falls as income rises

natural resources

- reduce worker effort - increase worker effort   - reduce worker quality  - increase worker turnover

GDP/Labour Force

Export minus import

Curtis is frictionally unemployed

John is structurally unemployed

Nemedia will grow the fastest.

The price of a substitute, wine, falls.

neither rise nor fall, although quantity supplied would increase.

investment

legal consulting fee.

GDP deflator || Consumer price index

Risen

the natural rate of unemployment.

not in the labour force.

downward, because the quantity of loanable funds demanded falls when the price of borrowing money rises.

the negative effect of government budget deficits on private investment spending

higher than the equilibrium interest rate.

decrease in perceived business opportunities.

rate of return of operation > interest rate.

savings of foreigners may support investment spending

If a person is out of job but is very confidence on finding a job and is just waiting for a better offer. Some people claim to be looking for work just to collect Employment Insurance benefits. Also, it can be any of the following: Discouraged searchers, Marginally attached worker and Underemployment.

No, because the market wage of accountants is much higher than minimum wage. 

Consumption: Buying a mobile phone.  Investment: A café purchasing an espresso machine to make espresso for customers. Government Purchase: National defense spending.  Net Export: Canada exporting oil to the US. 

Boom. During a boom, most labor is already employed, therefore there are shortages in the labor market. For the same reason, wages would increase (costs are rising). 

The worker lost since his real wage is lower now when the actual in ation turns out to be higher than expected 

A 20% increase in the price of new cars. It is because a car would has a higher weight in the basket of CPI that represent the consumption bundle of a typical consumer. 

If households are no longer taxed on income earned from interest on savings, savings will increase, and the supply curve for loanable funds will shift to the right. The equilibrium interest rate will decrease, and the equilibrium quantity of loanable funds will increase

A firm's value added is equal to the payments it makes to its employees plus its profits. In other words, it is equal to its total revenues minus the value of its purchases of inputs from other firms. If a firm now lays off its maintenance workers and contracts out its maintenance to an outside firm (suppose total expenditure is unchanged), its measured value added falls. When this company's value added falls, the value added of some outside firm rises by the same amount (assuming that total expenditure is unchanged). In this case, total value added in the economy is unaffected.

Unemployed / Labour Force

unemployed + employed

Change in Savings / Change in Disposable income

Autonomous Consumption + Marginal Propensity to Consume × Income

1 / 1 - Marginal Propensity to Consume 

nitial Increase in Spending x 1 / (1-Marginal Propensity to Consume) 

Current Output − Potential Output

Decrease in Output Required / Marginal Propensity to Consume

Potential GDP − Real GDP

Output Gap / K (Multiplier)

y = mx + by is the Consumer Spending,  x is the Disposable Income,  m is the slope (MPC),  b is the intercept (Autonomous Consumption). 

states that planned investment spending by firms is positively related to the expected growth of real GDP.  

depends on a combination of factors, including the market interest rate, wealth, and expected disposable income. 

represents the total output firms are willing to produce at a given price level

the relationship between the price level and the quantity of real GDP supplied in the short run, holding other factors constant. 

signifies the total spending by households, firms, and the government on goods and services within an economy. 

total quantity of goods and services produced by all firms within an economy over a specific period, typically measured in terms of Gross Domestic Product (GDP). 

total value of assets and possessions owned by individuals, businesses, or a nation within an economy at a specific point in time

the public becomes more pessimistic.

to the left.

consume more and save less, all else being equal. 

to the left.

left

self-correcting

is when planned spending matches the actual level of output or income in the economy, resulting in neither a surplus nor a deficit. 

estimate of what the budget balance would be if real GDP were equal to potential output. 

aims to reduce aggregate demand to control inflationary pressures or cool down an overheated economy. 

features of the economic system, such as progressive taxation and unemployment benefits, that automatically help stabilize fluctuations in economic activity by increasing government spending or reducing taxes during economic downturns, and vice versa during periods of economic expansion.  

difference between government revenues (such as taxes and other sources of income) and government expenditures over a specific period, typically a fiscal year, indicating whether the government has a surplus (revenues exceed expenditures), a deficit (expenditures exceed revenues), or is in balance (revenues equal expenditures). 

a measure of the total value of all goods and services produced within a country's borders, adjusted for inflation or deflation. It represents the economy's output after removing the effects of price changes, providing a more accurate reflection of changes in the quantity of goods and services produced over time. 

government debt held by individuals and institutions outside the government. 

expenditures made by the government on goods and services, such as infrastructure projects or defense spending, 

involve payments made by the government to individuals or other entities without the expectation of receiving goods or services in return, such as social security benefits or unemployment insurance.