a2e40b750086435ac5b6b079f9c5a4f1 - Economics Exam 3 Chapter...

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Economics Exam 3 Chapter 22 Practice Problems: 1-4, 7-16, 19, 20 A. Economic Growth - We collect data to observe the macro economy. 1. Definition- An economy is said to be growing if it is producing more stuff (goods and services) in one period than in the previous period (more economic activity). The more economic growth, the more workers needed, which means more income. 2. Measure- We look at the percent change in the amount of change in stuff we are producing= Gross Domestic Product-GDP. 3. Major Issue: Fluctuations over time - the economy doesn’t grow at a steady rate from here to eternity. a. Long run: Changes in productivity- Long run means decades and centuries. The main determinate in the rate of growth in an economy is the change in productivity. Change in productivity is output per worker per hour. The more you produce in more hour, the more growth. b. Short run: Business Cycle- From year to year, quarter to quarter, we will fluctuate in our rate of growth. Business cycle is periods of recession and depression. Most economic variables are a variable of the business cycle. c. Recession, Depression, Expansion- Recession is a period in time in which the rate of growths are negative (we are producing less stuff in each period). Expansion is the upside of the business cycle. Expansion is when it starts to growth again. Length of the recessions and expansions are varies. Depression is a very long severe recession. d. Example: Productivity (“procyclical”) - We say that productivity and productivity growth moves procyclically- it moves with the business cycle. As the economy is expanding, productivity growth will increase. In a recession, productivity will decrease. Interest rates also move procyclically. It is the business cycle that causes change in the other elements, not vice versus.
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B. Unemployment: The basics 1. Definitions- a. Unemployment Rate- U.S. unemployment rate is 9.8% in September of 2009. Unemployment rate is U(%) = #workers/LF X 100. Number of workers divided by labor force. LF= employed + unemployed. b. Labor Force Participation Rate (LFPR)- This is another good overall measure of the size of the job market; the extent to which market work pervades the economy and the society. This is getting a broader view of the number of people in the labor force. LFPR=LF/working age population X 100. 2. Measurement: BLS Household Survey- Bureau of Labor Statistics (they calculate the unemployment rate) Look at internet link on moodle. We count individuals 16 or older and rank them. We also look at the civilian non- institutional population. Population=Take out active duty military, people who are incarcerated, or under the age of 16. The left over if the working age population. Out of this population, we asked the questions of employed or unemployed (below). a.
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a2e40b750086435ac5b6b079f9c5a4f1 - Economics Exam 3 Chapter...

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