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ECON201 (Neri) Exam i

ECON201 (Neri) Exam i - Econ201 Macro Exam I 1 Ch 4 Three...

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Econ201 Macro Exam I 1 Ch. 4 Three major macroeconomics goals: 1. economic growth 2. full employment 3. stable prices Economic Growth Increase in production of goods and services Real GDP Total quantity of goods and services produced in a country over a year Increasing faster than the population Over long periods of times Small differences in growth rates can cause huge differences in living standards High Employment/Low Unemployment Joblessness Ppl who cannot find jobs –loss of income Economy is not achieving its full economic potential Unemployment rate % of the workforce that is searching for a job but hasn’t found one Business Cycle Fluctuations in real GDP around its long term growth trend Firms produce more—hire more workers Firms produce less—lay off workers Expansion - period of increasing real GDP Contraction - period of declining real GDP Recession - a contraction of significant depth and duration Depression - an unusually severe recession 3. Stable Prices With very few exceptions, inflation rate has been positive During 1990s, inflation rate-less than 3% per year A low inflation rate- important macroeconomic goal Inflation is costly to society Inflation - a sustained increase in the overall price level. Hyperinflation - a period of very rapid increases in the overall price level. Hyperinflations are rare, but have been used to study the costs and consequences of even moderate inflation. Deflation - a decrease in the overall price level. Prolonged periods of deflation can be just as damaging for the economy as sustained inflation. Macroeconomic Approach Understand how the entire economy behaves Aggregation- combines different things into a single category -treat them as a whole Ch. 5 Gross domestic product (GDP) Total value of All final goods and services Produced For the marketplace During a given year
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Econ201 Macro Exam I 2 Within the nation’s borders Total value Add up dollar value of every good or service –the number of dollars each product is sold for …all final When measuring production, we count only those that are sold to their final user --avoids over-counting intermediate products when measuring GDP Intermediate goods Used up in producing final goods Their value is including in the value of the final products they are used to create Final good Sold to its final user Their value included in GDP …goods and services… Final services count in GDP in the same way as final goods …produced… In order to contribute to GDP, something must be produced during the period being considered …within the nation’s borders GDP measures output produced within U.S. borders, regardless of whether it was produced by Americans -Americans abroad are not counted -However, foreigners producing goods or services within the country are counted. During a given year
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ECON201 (Neri) Exam i - Econ201 Macro Exam I 1 Ch 4 Three...

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