Term
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Definition
| GDP is the value of all goods and services produced by people in an economy. |
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Term
| How is the expenditure approach used to calculate the GDP? |
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Definition
| C(onsumption)+I(nvestment)+G(overnment spending)+ Net EX(ports) = GDP. |
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Term
| How is the income approach used to calculate the GDP? |
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Definition
| (W) Labor Income + (R)ental Income + (I) Interest Income + (PR)ofits = NI |
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Term
| What is the difference between nominal GDP and real GDP? |
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Definition
| GDP is based on prices that prevailed when item was produced. Real GDP is deflated/inflated to reflect changes in the price level. |
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Term
| What are the four limitations of using GDP to measure economic growth? |
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Definition
| nonmarket activities, the underground economy, negative externalities, quality of life. |
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Term
| What are intermediate goods? |
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Definition
| goods that are used in the production of other goods (such as steel, which will be transformed into another form) |
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Term
| What is the underground economy? |
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Definition
| the products and income that are not reported as income to the government |
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Term
| (What was the major change in the US economy in the 1990s? |
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Definition
| more capital equipment and manufacturing |
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Term
| How does capital deepening increase output per worker? |
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Definition
| "capital" (money) spent to improve the process (what ever it may be) will let each worker make more "product", usually with less effort. More product, more sales. |
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Term
| What happens when population grows and capital remains constant?* |
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Definition
| Economic depression. More people, less money. |
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Term
| How does the government aid technological innovation? |
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Definition
| through grants and other funding |
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Term
| (How does an economist compare the standard of living in two different countries? |
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Definition
| By comparing GDP per capita |
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Term
| (What is labor productivity? |
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Definition
| the total amount of work produced in an economy |
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Term
| (What does the unemployment rate represent? |
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Definition
| the total number of people who are unable to find work |
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Term
| (What does full employment mean? |
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Definition
| There is no cyclical unemployment |
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Term
| (What can happen to the economy when the level of unemployment is very low? |
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Definition
| it can create a booming economy |
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Term
| Explain the quantity theory of inflation |
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Definition
| The quantity theory of money states that there is a direct relationship between the quantity of money in an economy and the level of prices of goods and services sold. |
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Term
| Explain the demand-pull theory |
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Definition
| theory that inflation occurs when demand for goods and services exceeds existing supplies. |
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Term
| (What typically happens to the inflation rate when unemployment falls to very low levels? |
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Definition
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Term
| What do statistics show about a lack of education contributing to poverty? |
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Definition
| There is very little access to jobs for non-educated people, which of course leads to poverty. Research has found that there is a high risk of educational underachievement for children who are from low-income housing circumstances. |
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Term
| What has the divorce rate shown about poverty? |
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Definition
| People with economic disadvantages are just as likely to marry as other people, but their marriages are substantially more unstable. Poverty and divorce go together. |
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Term
| (What age group in the US has the largest percentage of its members living in poverty? |
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Definition
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Term
| Which of the following is among the root causes of poverty in the US? |
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Definition
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