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Topics: Monetary policy, Inflation, Keynesian economics Pages: 11 (2698 words) Published: October 8, 2013
22.        What is the difference between real and nominal?       Real = Nominal – Inflation.
      Real GDP adjusts Nominal GDP for changes in the price level (inflation and deflation).  Real GDP = Nominal GDP / Price Index 23.        What’s not included in GDP?
      GDP represents the total market value of all final goods and services produced in a country in one year.       Items excluded from GDP include: non-production transactions, existing goods or property sold/transferred, used items, secondhand sales, illegal activities, purely financial transactions, public transfers (social security, cash welfare benefits, etc.), private transfers (allowances, alimony payments, etc.), or the sale of stocks and bonds. 24.        What are the determinants (shift factors) of aggregate demand?       Changes in consumer spending, investment, government spending, and net exports will cause AD to shift.  If consumer wealth increases, expectations become positive, household indebtedness decreases, or taxes decrease, AD will shift to the right (increase).  If interest rates decrease or profit expectations increase, AD will shift to the right (increase).  Profit expectations depend upon things such as expectations on future business expectations, technology, excess capacity, or business taxes.  Net exports may change based on the amount of national income abroad or the value of the dollar. 25.        What are the determinants (shift factors) of aggregate supply?       Changes in input prices, productivity, or the legal (institutional) environment will result in a shift of the AS curve.  Increases in domestic resource availability, decreases in the price of imports, or decreases in market power, will cause AS to shift to right (increase).  Increases in subsidies, decreases in taxes, or reductions in government regulation will shift AS to the right.  And, increases in productivity will lower per-unit production costs and increase AS. 26.        What is cost-push inflation?

      Cost-push inflation exists when prices rise because of a rise in the per-unit production costs. 27.        What is demand-pull inflation?
      Demand-pull inflation exists hen total spending exceeds the economy’s ability to produce output at the current price level.  28.        What is considered investment (I)?
      Purchases of machinery, equipment, and tools by businesses.       Construction (including residential).
      Changes in business inventory.
29.         What does full employment mean?
      Full employment means all available resources are being employed.       4-6% unemployment.
30.        Who is excluded from the labor force?
      If you are not actively seeking work.
      Discouraged workers (those who want a job, but are NOT actively seeking one).       Homemakers for non-market wages.
      Retired workers.
      Disabled workers.
31.        What are the four types of unemployment?
1.  FRICTIONAL: 
      Between jobs (personal choice).
      They may have quit one job to find another, or they may be trying to find the best opportunity after graduating. 2.  STRUCTURAL: 
      Job mismatch … Skills don’t match the skills businesses want … Basis for government job training programs.       This happens as the demand for certain types of labor changes because skills are now obsolete. 3.  CYCLICAL:

      Insufficient aggregate demand for people actively seeking jobs. 4.  SEASONAL:      Unemployment caused by changes in the weather. 32.        How does one calculate the unemployment rate?             The unemployment rate represents the % of the labor force not employed!             Labor force = employed  + unemployed.             Unemployment rate = # unemployed / # labor force. 33.        What is MPS?

      Marginal propensity to save is the % of any change in income that is saved.       MPS = ∆ Savings / ∆ Income.
34.        What is MPC?
      Marginal propensity to consume is the % of any...
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