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Questions and Answers
What is GDP?
What is GDP?
the value of all final goods and services produced domestically
What does the demand measure of GDP accounting add together?
What does the demand measure of GDP accounting add together?
consumption, investment, government purchases, and trade balance
What are examples of durable goods?
What are examples of durable goods?
cars and furniture
What are inventories?
What are inventories?
In order to avoid double counting, statisticians just count the __________________.
In order to avoid double counting, statisticians just count the __________________.
What is now the largest single component of the supply side of GDP?
What is now the largest single component of the supply side of GDP?
In which countries does the command economy predominates?
In which countries does the command economy predominates?
In a _______________________, most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers.
In a _______________________, most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers.
What is meant by the underground economy?
What is meant by the underground economy?
What is division of labor?
What is division of labor?
If macroeconomics looks at the economy as a whole, what specific aspect does it focus on?
If macroeconomics looks at the economy as a whole, what specific aspect does it focus on?
In the ____________, households work and receive payment from firms.
In the ____________, households work and receive payment from firms.
In the ______________, households receive goods and services and pay firms for them.
In the ______________, households receive goods and services and pay firms for them.
What describes a monetary policy tool?
What describes a monetary policy tool?
What is the connection from inputs to outputs for the entire economy called in macroeconomics?
What is the connection from inputs to outputs for the entire economy called in macroeconomics?
The value of what is produced per worker, or per hour worked, is called ____________.
The value of what is produced per worker, or per hour worked, is called ____________.
When society has a higher level of capital per person, it is called ______________.
When society has a higher level of capital per person, it is called ______________.
During the Great Depression, the unemployment rate reached what percent?
During the Great Depression, the unemployment rate reached what percent?
What is frictional unemployment?
What is frictional unemployment?
What type of unemployment occurs because of a recession?
What type of unemployment occurs because of a recession?
What is efficiency wage theory?
What is efficiency wage theory?
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Study Notes
GDP and Economic Indicators
- GDP represents the total value of all final goods and services produced within a country.
- Demand measure GDP accounting combines consumption, investment, government purchases, and trade balance for economic analysis.
- Durable goods are items such as cars and furniture that have a long lifespan and provide prolonged utility.
Inventory and Economic Measurements
- Inventories consist of goods that are produced but not yet sold, stored in warehouses for future sales.
- To avoid double counting, only final goods and services are included in GDP calculations.
Components of GDP
- Services have become the largest component of GDP's supply side, accounting for over half of its total value.
Economic Systems
- Command economies, where economic decisions are centrally controlled, are predominant in countries like Cuba and North Korea.
- A market-oriented economy features decisions made by buyers and sellers regarding production and consumption.
Labor and Market Functions
- The underground economy consists of markets where transactions occur without government oversight.
- Division of labor involves splitting production tasks among various workers to improve efficiency.
- Households engage in the labor market, providing work to firms in exchange for payment.
Monetary Policy and Productivity
- Interest rates are a crucial tool in monetary policy, influencing economic activity and consumer spending.
- An aggregate production function describes the relationship between inputs and outputs for the entirety of the economy.
- Productivity quantifies the output generated per worker or per hour worked, impacting economic growth.
Capital and Employment
- Capital deepening occurs when society increases the capital available per person, fostering higher productivity.
- The Great Depression saw unemployment peak at 25%, signifying a severe economic downturn.
- Frictional unemployment arises from routine labor market transitions, while cyclical unemployment is linked directly to economic recessions.
- Efficiency wage theory suggests that higher wages can lead to improved worker productivity, enhancing overall economic performance.
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