1GDP
gross domestic product
2What does GDP measure?
the income of a nation
3What is the equation for GDP?
GDP = C + I + G + (EX - IM)
4What is 'C' in GDP?
consumption (only goods produced in current year)
5What is the 'I' in GDP?
investment, amount of money spent by businesses on resources
6What is the 'G' in GDP?
government spending on public services
7What is the 'EX - IM' in GDP?
exports - imports
8What is not included in GDP?
made in previous years, personal transactions
9inflation
general rise in the price of goods
10How is inflation measured?
govt. tracks changes in price in the market baskets
11market basket
made up of 300 common goods (medical, tuition, gas, bread)
12inflation rate
percent change in price in one year (or based on 1982/ base year)
13cost of living adjustment (COLA)
negotiating wages to match inflation
14consumer price index (CPI)
measure of inflation for consumers
15How do you calculate CPI?
(price of market basket/price of market basket in base year) x 100
16What are the 3 problems with CPI?
substitution bias, new products, product quality
17substitution bias
as market basket goods increase, consumers may buy goods outside of market basket instead
18new products (CPI bias)
market basket may not include new products
19product quality (CPI bias)
price of market basket may have stayed the same, but the quality hasn't
20What are the 3 causes of inflation?
government prints too much money, demand-pull, cost-push
21demand-pull
too many dollars chasing too few goods
22cost-push
higher production costs increase prices
23wage-price spiral
workers demand increased wages, able to spend more money and causes demand-pull, prices rise, and workers demand increased wages again
24How many Americans belong to the civilian labor force?
~1/2
25How to calculate unemployment rate?
# of unemployed/civilian labor force
26civilian labor force
total number of employed and unemployed ober 16 years
27Who is not part of the civilian labor force?
under 16, institutionalized, military, retired, full-time student
28discouraged worker
worker that gives up looking for a job
29underemployed
worker that is overqualified for the job, or wants to do full-time but does part-time
30What is the natural unemployment rate?
4-5%
31Why is 0% bad/not achievable?
It means all job positions are filled and you would be unable to change jobs
32What are the 4 types of unemployment?
seasonal, frictional, cyclical, structural
33seasonal unemployment
loss of job due to change in season
34frictional unemployment
just graduated, or moving in between jobs
35cyclical unemployment
job loss during contraction period of business cycles
36structural unemployment
loss of job due to no demand/outdated/ replaced by technology
37What are the 4 phases of the business cycle?
expansion/ recovery, peak, contraction/ recession, trough
38business cycle
ups and downs in levels of economic activity
39bonds
money you loan to the government (government pays you to give them money)
40What are the three tiers of the federal reserve system from highest to lowest?
Federal open market commitee (FOMC), 12 district banks, and member banks
41Where is the HQ of the FOMC?
DC
42What state is the financial center of the US?
New York
43Which tier of the federal reserve system are the Board of Governors a part of?
FOMC/federal open market committee
44How many are on the Board of Governnors?
7
45How long is a term of a Board of Governors?
14 years
46How long is the term of the chair of the Board of Governors?
4 years
47How are people elected to the Board of Governors?
The president appoints them and the Senate approves of them
48What are the 6 characteristics of money?
durability, acceptability, divisibility, uniformity, limited supply, and portability
49What are the 3 uses for money?
medium of exchange, store of value, unit of account
50fiat
government issued money
51commodity
good with intrinsic value
52legal tender
money the government requires to be accepted while settling debts
55liquidity
ease of turning the money into cash
56What is the journey of a check?
check writer to check recipient to federal reserve bank to check writer's bank