January 26,2016
1.
Circular flow diagram
·
Represents the transactions in an economy.
2.
Product Market
·
The place where goods and
services are produced by businesses.
3.
Factor Market
·
The place where households sell resources and businesses buy
resources.
·
Firms purchase or rent land as well as higher workers
4.
Firms
·
an organization that produces goods and services for sale.
5.
Household
·
A person or a group of people who share an income.
January 27,2016
1.
Gross Domestic Product (GDP)
a.
The market value of all final goods and services produced within a
nation in a given year.
b.
What’s not included in GDP?
i.
Intermediate Goods
1.
A good that requires further processing before they are ready for
final use.
2.
Unfinished door without glass.
3.
A car's pieces.
ii.
Used or Secondhand Goods
1.
Double counting
2.
Thrift clothing
iii.
Purely Financial Transactions
1.
Stocks and Bonds
iv.
Unreported Business Activity
1.
Tips
v.
Illegal Activities
1.
Drugs
vi.
Nonmarket Activities
1.
Volunteering
2.
Babysitting
3.
Anything for yourself
vii.
Transfer Payments
1.
Public
a.
Social Security
b.
VA
c.
Welfare
2.
Private
.
Scholarships
c.
Whats included
.
65% C- Personal Consumption Expenditures
1.
New Purse
i.
17% Ig- Gross Private Domestic Investment
1.
New factory equipment
2.
Factory Equipment Maintenance
3.
Construction/Housing
4.
Unsold inventory of products built in a year
ii.
20% G- Government Spending
iii.
-2% Xn- Net exports
iv.
exports-imports
1.
Imports
2.
Exports
January 29, 2016
1.
Ways to calculate GDP
a.
Expenditure Approach
i.
Add up all of the spending on final goods and services produced in
a given year.
ii.
GDP= C + Ig + G + XN(Ex-Im)
b.
Income Approach
.
Add up all the income that resulted from selling all final goods
and services provided in a given year?
i.
GDP = W + R + I + P+ Statistical adjustments
1.
GDP = Wages + Rent + Interest + Profits + Statistical adjustments
(Indirect business taxes, depreciation, Net foreign factor payment)
2.
National Income
.
Compensation of employees
.
Wages
i.
Salaries
ii.
Fringe Benefits
iii.
Social Security Contributions
iv.
Health
v.
Pension Plans
a.
Rent
.
Income of property owners
b.
Interests
.
Income that is paid by someone to the owner of a loan
c.
Corporate Profits
.
The income of stockholders in a corporation
d.
Proprietors income
.
Income of a sole proprietor or in a partnership
3.
Budget
.
Government Purchases of goods and services + Government transfer
payments – Government tax and fee collection.
a.
Surplus
.
Negative number
b.
Deficit
.
Positive number
4.
Trade
.
Exports – Imports
a.
Surplus
.
Positive number
b.
Deficit
.
Negative number
5.
National income
.
W + R + I + P + C
February 30, 2016
1.
Net Domestic Product
a.
GDP - depreciation
2.
Net National Product
.
GNP - depreciation
3.
Gross National Product
.
GDP + foreign factor payment
4.
Nominal GDP
.
The value of output produced in current prices
a.
Can increase from year to year if either output or prices increase
b.
(P*Q)
5.
Real GDP
.
Value of output produced in constant or base year prices
a.
Adjusted for inflation
b.
Can increase from year to year only if output increases
c.
(P*Q)
6.
Economic Growth
.
Real GDP
7.
Increase in prices (Inflation)
.
Nominal GDP
8.
GDP Deflator
.
Price index used to adjust from nominal to real
a.
(Nominal GDP/ Real GDP) * 100
b.
In the base year the GDP Deflator will always equal 100
c.
For years after the base year the GDP Deflator is greater than 100
d.
For years before the base year the GDP Deflator is less than 100
9.
Consumer Price Index (CPI)
.
The most commonly used measurement for inflation
a.
Measures the cost of a market basket of goods for a typical urban
American family
b.
(Cost of a market basket of goods in a given year / Cost of a
market basket of goods in the base year) * 100
10.
Inflation
.
(Price index in year 2) - (the price index in year 1) / (the price
index in year 1 * 100)
February 1, 2016
1.
Nominal interest rate
a.
Percentage increase in money the borrower must pay the lender for
a loan
b.
Not adjusted for inflation
c.
Anticipated inflation
d.
Fisher effect
i.
Nominal = expected + inflation premium
2.
Real interest rates
.
Percentage increase in purchasing power the borrower must pay the
lender for a loan
a.
Adjusted for inflation
b.
Unanticipated inflation
.
Real =nominal - inflation
3.
Inflation
.
Hurt
.
Savers
i.
Creditors & lenders
ii.
Those on fixed income
a.
Helped
.
Debtors
4.
COLA
.
Cost of living adjustment
.
Automatic wage increases when inflation occurs
February 3, 2016
1.
Unemployment
a.
It is failure to use available resources, particularly labor to
produce desired goods and services
2.
Labor force
.
>16 years old
a.
Able and willing to work
b.
Employed + unemployed
3.
Not in the labor force
.
Military
a.
Students
b.
Retirees
c.
Disabled
d.
Homemakers
e.
Mental institutions
f.
Jail/Prison
g.
Those who are not looking for a job
4.
Unemployment Rate
.
4-5%
i.
Full employment
ii.
Natural rate of unemployment. NRU
a.
(# of unemployed) / ((# of employed) + (the number of unemployed))
* (100)
5.
4 Types of unemployment
.
Frictional
.
Searching for a job
i.
Temporarily unemployed or in between jobs
ii.
People who fall in this have transferrable skills
1.
Looking for better opportunity
2.
Recent graduate
a.
Structural
.
Changes in the structure of the labor force which makes some
skills and jobs obsolete
i.
Do not have transferrable skills
1.
NASA Employees
2.
VCR Repairman
b.
Seasonal
.
Depends upon the time of the year and the nature of the job
1.
School bus drivers
2.
Life guards
3.
Holiday impersonators
4.
Contractors
5.
Fireworks Stands
d.
Cyclical
i.
Results from economic downturns such as a recesson
ii.
As demand for goods and services fall demand for labor also falls
and workers are laid off.
5.
Frictional + Structural = NRU
6.
Full Employment means there is no cyclical unemployment
February 5, 2016
GDP Gap- the amount, by
which actual GDP falls short of potential GDP.
Okun’s Law- for every 1% in
which the actual unemployment rate exceeds the natural unemployment rate (NRU),
a GDP gap of about 2% occurs.
·
In 2012, the
unemployment rate for Mexico was 7.4%. the NRU for Mexico is 6%.
·
9Actual
unemployment rate- NRU) x 2
·
7.4-6=1.4x2=2.8
Rule of 70- used to
determine how many years it takes for a value to double, given a particular
annual growth rate.
·
If you put
$20,000 in the bank, and it earns a yearly interest of 7%, how many years will
it take for your income to double? 10
