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Exam 1-Study Guide - Chapter 6 Real GDP The value of...

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Chapter 6 Real GDP- The value of current output using base year prices Economic Growth Rate - (Real GDP Current-Real GDP Previous)/(Real GDP Previous) ***Rule of 72*** - The number of years it takes for any variable to double is approximately 72 divided by the annual percentage growth rate of the variable. *With an increase in the supply of labor and no increase in demand-real wage rate falls* % Change in Standard of Living = % Change in (Output/Pop.) = % Change in Output - % Change in Pop. % Change in (Output/Pop.) = % Change in (Output/Labor) + % Change in (Labor/Pop.) [^Output per worker^] [^^% of people who are working] **The quantity of Actual GDP/Real GDP is the potential GDP when the market is at equilibrium** Potential GDP -- The highest level of real gross domestic product that could persist for a substantial period without raising the rate of inflation Unemployment rate= # of Unemployed/Labor Force Classical Growth Theory- The growth of real GDP per person is temporary and that when it rises above subsistence level, a population explosion eventually brings it back to the subsistence level.
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