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Gasoline prices increase by 50 percent and other things remain the same. As a result, there is
a decrease in the quantity of gasoline demanded.
increases the demand for a good
the expectation that future income will be higher
Which of the following shifts the supply curve of rutabagas rightward? (A rutabaga is a potato-like 3) vegetable.)
a fall in the price of fertilizer used to grow rutabagas
The price of salsa rises. How does the increase in the price of salsa affect the supply of salsa?
There is no change to the supply of salsa, but the quantity of salsa supplied increases.
A measure of a country’s production is its
Gross domestic product
Which of the following is included in Germany’s GDP?
china produced by the English-owned Wedgewood Company at a factory in Berlin, Germany
In measuring GDP, which of the following is included?
the value of increases in business inventories
Everything else the same, if government expenditure increases by $400 billion and imports increase 9) by $400 billion, then GDP
does not change.
The base year is 2010. A country only produces MP3 players. The price of an MP3 player in 2008 10) was $50. The price of an MP3 player was $30 in 2010. The quantity of MP3 players produced in
2008 was 10,000 units and in 2010 was 20,000 units. Nominal GDP in 2010 equals
2008 was 10,000 units and in 2010 was 20,000 units. Nominal GDP in 2010 equals
$600,000.
Phillip is a 22-year old who has no job and is available for work, but has not actively looked for a job in the last month. The Current Population Survey identifies Phillip as ________ , ________ the
labor force, and ________ the working-age population.
labor force, and ________ the working-age population.
not unemployed; not part of; part of
If the number of people in the labor force ________, then ________.
increases; the labor force participation rate increases
As firms search for the best employee to fill an opening and the unemployed search for the job that best fits their skills, the economy experiences
frictional unemployment.
Cyclical unemployment is
created by a recession.
When the economy is at full employment, the
natural unemployment rate equals the employment rate
someone is unemployed if
wants a job and is willing to take a job but after searching last week cannot find a job
marginally attached worker
doesn’t work, is available and willing to work, but hasn’t looked for a job recently
if BLS included all marginally attached workers as being unemployed, the ____ would be ____
unemployment rate; higher
when the economy goes into recession, biggest increase in unemployment is____
cyclical because jobs are lost in many industries as they cut production
the economy is at full employment when all unemployment when all unemployment is ____
structural and frictional
potential GDP is the value of real GDP when ______
the unemployment rate equals the natural unemployment rate
when the unemployment rate_____ the natural unemployment rate, real GDP is _____ potential GDP and the out put gap is_____
exceeds; below; negative
the natural unemployment rate_____
is the unemployment rate when there is no cyclical unemployment
Gross domestic product is the market value of all the _____ in a given period of time
final goods and services produced by all firms located in the US
a ____ is the final good and ____ is the intermediate good
tank of gasoline bought by you; jet fuel bought by Southwest airlines
saving equals____
income minus consumption expenditure minus net taxes
the expenditure approach to measuring US GDP equals
all expenditure on finals goods and services produced in the US in a given time period
what is correct about the business cycle?
-from trough to peak, economy is in expansion.
-peak to trough, recession.
-periodic movement in econ activity including employment
-peak to trough, recession.
-periodic movement in econ activity including employment
real GDP per person is not accurate measure of the standard of living because it
omits the goods and services that people produce for themselves
Real GDP
does not accurately measure leisure time, enviro quality, or political freedom and social justice
other things remaining the same, a rise in the price of good will
decrease the quantity demand of that good
in the market for jeans, what increases the demand for a pair of jeans
price of denim skirt rises
other things remaining the same, a fall in the price of peanuts will
decrease quantity supplied of peanuts
in the market for cell phones, what increases the supply?
new tech lowers the cost of making a cell phone
when floods wiped out the banana crop in C.A, the equilibrium price of bananas _____ and the equilibrium quantity of bananas _______
rose; decreased
a decrease in demaand for chocolate with no change in the supply of chocolate will create a ____ of chocolate at today’s price, but gradually the price will____
surplus; fall
minimum wage set above the market equilibrium wage rate____
increases unemployment and decreases employment
a rent ceiling creates a _____ of housing if it ______ the equilibrium rent
shortage; is less than
what shifts demand?
preferance
market
any arrangement that brings buyers a nd sellers to gather
-supply
-demand
-supply
-demand
competitive market
has so many buyers and seller that no single buyer or seller can influence price
quantity demanded
amount of any good, service or resource that people are willing and able to buy during a specified period at a specified place
-no time, no meaning
-no time, no meaning
what influences buying?
price
law of demand
if price of a good rises and quantity demanded of that good decreases; if the price of a good falls, the quantity demanded of the good increases
ex of law of demand
iPhone price falls, we’ll buy
demand
list of quantities at different prices illustrated by demand schedule and demand curve
demand schedule
list of quantities demanded at each different price when all other influences on buying plans remain the same
ex of demand schedule
if water is $2, quantity demanded is 8.5 mill. If 1.50, quantity demanded is 9 mill
what do demand curves show
how quantity demanded changes when price changes.
-everything else remains the same
-everything else remains the same
change in ______ of good results in change in ______ of good while everything_____
-quantity; price; remains the same
influences on buying plans that change demand
-price of related goods
-expected future price
-income
-expectations
-# of buyers
-expected future price
-income
-expectations
-# of buyers
goods have_____ and ______
substitutes; complements
substitutes
good that can be consumed in place of another good
complement
good that is consumed with another good
inferior good
good which demand decreases when income increases and demand increases when income decreases
normal good
rise in income brings an increase in demand and a fall in income brings a decreases in demand for it
quantity supplied
amount of any good or service or resource that people are willing and able to buy at a specified period and price
law of supply
others remaining the same, if $$ of a good rises, the quantity supplied of that good increases.
-higher price provides the incentive to bear the higher opportunity cost of increased production.
-higher price brings larger profit
-higher price provides the incentive to bear the higher opportunity cost of increased production.
-higher price brings larger profit
supply schedule
list of quantities supplied at each diff price when all the other influences on selling plans remain the same
supply curve
graph of a relationship between the quantity supplied of a good and its price when all other influences on selling plans remain the same
upward slope on graph means
law of supply goes up and quantity goes up
supply of good and complement
go in same direction
productivity
output per unit of input.
-increases in productivity lower the cost of producing the good and increases the supply
-increases in productivity lower the cost of producing the good and increases the supply
market equillibrium
when the quantity demanded equals the quantity supplied.
-buyers and sellers are in balance
-buyers and sellers are in balance
equillibrium price
price at which quantity demanded equals the quantity supplied
equillibrium occurs on a graph when
demand curve and supply curve intersect
surplus
amount at which quantity supplied exceeds the quantity demanded
-cut price to sell more
-cut price to sell more
shortage
amount by which quantity demanded exceeds the quantity supplied.
-shortage= higher price
-shortage= higher price
both demand and supply change
in same direction
if the price of an SUV falls
no change in supply, change in quantity supply
if an SUV’s price is expected to fall next year
produce more this year
what can affect supply
related goods
a new robot tech lowers the cost of producing SUVs
supply goes up
SUV defective, require huge and costly recall to replace defective parts
cost goes up
-supply falls
-supply falls
what happens to supply curve of new homes if the wage rate period paid to carpenter falls?
cost of building falls, supply goes up
eating oatmeal helps prevent heart disease. effect of change on equilibrium price and quantity
quantity goes up, price increases
in equillibrium P and Q
move together
is air fuel decreases, some peoples income increase and prefer to fly, what happens to market
demand for airline tickets increase
increase in demand
increase in supply
increase in demand
increase in supply
price can’t go up
ceiling
law of demand: all things remaining the same, a rise in price of a good will_____
decrease the quantity demanded of that good
GDP
gross domestic product
-total market value of final goods and services produced in a country for a given time period
-total market value of final goods and services produced in a country for a given time period
GDP depends on
what country its in
measure GDP
GDP=C+I+G+NX
-c=consumer sprending=consumption
i=investment
g=government spending
NX=net experts
-c=consumer sprending=consumption
i=investment
g=government spending
NX=net experts
ex of a non GDP good
purchase of copy paper by intel,useful but not intermediate good
sticky price
long term contracts
final good or service
good or service thats produced for its final uses and not as component of another good or service
intermediate good/service
good or service that’s used as a component of a final good or service
how is a ford a final and intermediate good
final-car
intermediate-tires
intermediate-tires
GDP counts
-only items traded in markets
-doesn’t include svalue of goods and services that people produce themselves
-doesn’t include svalue of goods and services that people produce themselves
ex of when GDP counts
buy carwash.
-doesn’t count: wash car yourself
-doesn’t count: wash car yourself
US GDP
market of final value goods/services produced in US
consumption expenditures
non durable goods and durable for home
i.e blender
i.e orange juice
i.e blender
i.e orange juice
investment
durable goods
i.e home.
not stocks and bonds
i.e home.
not stocks and bonds
expenditure approach
measures GDP using data on consumption expenditure, investment, gov’t expenditure on g/s and net exports
used good
not apart of GDP, were apart of it at one point
financial assets
not a good and service
depreciation
the decrease in the value of capital that results from its use and from obsolescence
wages, interest, rent and profit
not GDP
statistical discrepency
GDP expenditure foal.
-gdp income total.
-expenditure is more reliable GDP
gross national product
market value of all the final g/s produced anywehere in the world in a given time period
ex: nike shoes made in Vietnam
ex: nike shoes made in Vietnam
diff between producing more and paying more
producing more- helps our standard of living.
paying means cost of living increased but standard of living hasn’t
paying means cost of living increased but standard of living hasn’t
real gdp
value of final goods/service produced in a given year, reference base year
nominal gdp
value of final goods/service produced in a given year expressed in terms of the price of the same year
standard of living over time
measured by value of goods/service that people enjoy on average
potential GDP
level of real GDP when all the economy’s factors of production-labor, capital, land, and entreprenurialship are fully employed
-factors are unemployed, real GDP is below potential
-factors are unemployed, real GDP is below potential
business cycle
periodic but irregular up-and-down movement if toal production and other measures of econ activity
phases and turning points in b.cycle
p: expnasion and recession
tp: peak and trough
tp: peak and trough
expansion
real GDP increases
recession
period which real GDP decreases for at least 6 months
peak
highest level of real GDP attained; turning point between expansion and recession
trough
temporarily low point in GDP; turning point from recession to expansion
comparing GDP per person among countries
common set of prices (purchasing power parity prices)
GDP measures g/s that are bought in markets, excludes
-household production.
-underground production.
-leisure time.
-enviro quality.
-underground production.
-leisure time.
-enviro quality.
other influences on standard of living omitted from GDP
-health and life expectance-have improved past decades.
political freedom and social justice
political freedom and social justice
U:
# of unemployed people
E:
# of employed people
-work at least one hour a week
-work at least one hour a week
U+E
civilian labor force
u rate=
# of people unemployed/labor force(U+E)*100
ex: julie is an autoworker, didn’t work last week because union on strike
employed
employed doesn’t always mean what
they’re working
labor force participation rate=
employed/ working age pop *100
things affected by natural rate
structural
frictional
frictional
things that make searching harder=
raises frictional
affect rates
demographics
technology
real wage
technology
real wage
ex: frictional
college student searching for a job
ex: structural
Ford moving plant from Michigan—-Mexico
ex:cyclical
economy in 2008-2009 (U-U*)
if add marginally attached to unemployment
raise unemployment
recession=
cyclical
working age population
total # of people aged 16 years and over that are not in jail, hospital, or US armed forces
labor force
number of people employed + # unemployed
who is not apart of labor force
retired people or school full time
labor market indicators
unemployment rate
labor force participation rate
labor force participation rate
part time workers
committed from unemployment
two groups for part time:
econ and non econ
non econ
don’t want full time and are not able
i.e health reasons
i.e health reasons
econ
work 1-34 hours week and are looking for fulltime
4 reasons for participation rate in work 1960-1999
-women got college degrees
-tech changes work places, created white collar jobs
-teach change have increased time at work
-fam need 2nd income
-tech changes work places, created white collar jobs
-teach change have increased time at work
-fam need 2nd income
why did participation in men decrease
full-time edu
retired
retired
U3
official unemployment rate
u=u/(u+e)*100
u=u/(u+e)*100
U1
% of labor force that has been unemployed for 15 weeks+ and measure of long-term involuntary unemployment
U2
% of labor force that has been laid off and is another measure of involuntary unemployment
U4
U3 + discouraged workers
U5
U4+ plus other marginally attached workers
U6
U5+part time workers for econ reasons
if you’re part time
no benefits
frictional
unemployment that arises from people entering and leaving labor force, from quality jobs to find better ones and from ongoing creation and destruction from jobs
when does frictional unemployment increase
more people enter labor market
-or when unemployment benefits increase
-or when unemployment benefits increase
structural
arises when changes in tech or international competition change skills needed to preform jobs or change locations
structural unemployment_______ frictional
usually lasts longer than
cyclical
fluctuating unemployment over a business cycle that increases during recession and decreased during expansion
ex of cyclical
laid off during recession, rehired during expansion
natural unemployment
arises from frictional and structural changes when there is no cyclical unemployment.
-economy at full employment
-economy at full employment
full employment
situation in which the unemployment rate= nat unemployment rate
factors that affect natural rate of unemployment
-age distribution
-pace of structural change
-real wage rate
-unemployment benefits
-pace of structural change
-real wage rate
-unemployment benefits
when there is full employment,
no cyclical
when unemployment is above natural employment
cyclical is positive
in 2005-2008 unemployment was down so
cyclical was negative
outtput gap
real GDP- potential GDP
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