unit 2 study cards

where goods and services are sold

goods and serviced are produced by them so they can supply it to other people

they demand goods and services rather than supplying them

where resources ( land labor capital enterpreneurial skill) are sold

resources are sold to them because they demand resources

they supply resources to be sold to other people

supply products and demand resources

demand products and supply resources

part of the economy run by individuals and businesses

part of the economy controlled by the government

payment for factors of production : rent (land), wages (labor), interest (financial capital), profit (entrepreneur)

govt money payments but they do not recieve anything in return (welfare, social secruity, unemployment)

government transfer payments to businesses

money is leaving circulation or stops flowing around

money is being added to circulation

leakage, money is not spent so not circulating

leakage, money is sent to foreign country

addition, money is being put into a business

addition, foreigners buy our goods and send us money

supply government expenditutres, demand resources

demand goods and services, supply government expenditures

demands taxes from businesses/firms and individuals/households

nominal gdp/real gdp (100)

current production) (current prices)

nominal gdp / price index (100)

new gdp - old gdp / old gdp (100)

new price index - old price index / old price index (100)

real or nominal gdp total / population that year

current market basket / base year market basket (100)

current market basket / cpi (100)

nominal income/cpi (100)

temporary slowing of the pace of price inflation

prices rising quickly ( 10%+ or higher a year )

borrowers/debtors, firms/businesses, flexible income earners

nominal interest rate - expected inflation

real interest rate + expected inflation

(m)(v)=(p)(y)

demand increases, supply not changing.

caused by changes in spending beyond production capacity

caused by increased costs for factors of production

price increase, decrease in supply

temporary maximum in real gdp

unemployment rate LOW or at natural rate of unemployment

inflation rate HIGH

decline in real gdp accompanied by increase in unemployment and typically decreasinf inflation rate

economic decline must be atleast 6 months long

bottom of business cycle - gdp is at the temporary maximum low

unemployment rate is probably high and inflation is probably low

where economy is returning to full employment , gdp is rising but inflation rate is increasing

expansion beyond the previous peak

employed + unemployed

labor force/population (100)

16 years or older

working average 1 hour / 2 weeks

working but not making enough to live off of or working a job in which theyre over qualified

people 16 years or older that do not have a job but have actively searched for a job within the last 2 weeks

unemployed/labor force (100)

temporary,voluntary, in between jobs, changing jobs, newly entering the workforce.

good for individuals and society

declining industries, lack skills/education, replaced, mismatches in skills and jobs available

good for society - pushes advancement/education, increased skill levels

business cycle downturn/ recession, layoffs due to not needing labor (lack of demand slows business)

bad for society and indiviuals

foreign produced goods, no double counting or multiple counting, intermediate goods, used/second hand goods, transfer payments, underground/black market/ non market activtiy.

fixed income recivers, savers, creditors (lenders)

consumption, gross private investment, government spending, net exports (exports-imports=net exports)

C+Ig+G+(X-M)

wages for use of labor resources , rents for use of land resources, interest for use of financial capital resources, profits for use of entrepreneurial skill.

labor force/adult population (100)

unemployed/labor force (100)

FRICTIONAL + STRUCTURAL unemployment