Macroeconomics (test 2)

GDP/Total population

Purchasing power parity
constructs the cost of a representative bundle of commodities in each country and adjusts GDP so that a dollar in each country can purchase this representative bundle

GDP/number of people in employment

The value of goods and services that a worker generates for each hour of work

A measure of absolute poverty. Living on $1.25 a day per person (Dem. Rep of the congo is poorest)

A person stock of skills to produce output or economic value

Any good (machines, equipment, buildings) used for production

Uses labor and capital more efficiently and achieves high productivity

Human capital, physical capital, and technology

All of GDP, determines why production varies
Y=A x F(K,H)

Product of the total number of workers and the average human capital.
H=L x h

The marginal contribution of a factor of production to GDP diminishes when we increase the quantity used of that factor of production

1. Knowledge
2. Efficiency of Production- The ability of a society to produce the maximal amount of output at a given cost
3. Entrepreneurship

Increase in GDP per capita of an economy

Growth(Y1,Y2)=(Y1-Y2)/Y1

Process by which a quantity grows at an approximately constant growth rate

Nations are catching up with the world leaders in income and technology

Positive and relativity steady growth rate in every 50 year period

Total saving/GDP

Process of new technology, goods, and services that are being invented, introduced, and used in the economy

Increase in aggregate income….increase income/capita…population growth…decreasing aggregate income and it continues
(Industrial revolution broke the cycle)

Technology

Link high levels of prosperity to high levels of the inputs to production, but without providing an explanation for why the levels of inputs are so high (human capital, technology, physical capital)

Causes that are the root of the differences in the proximate causes of prosperity (Culture, institution, geography)

Differences in geography, climate, and ecology ultimately determine the large differences in prosperity around the world

Different societies respond differently to incentives

The formal and informal rules governing the organization of a society, including its laws and regulations

1. Determined by individuals as members of a society
2. Place constraints of behavior
3. Shape behavior by determine incentives

The differences in the way that humans have chosen to organize their societies

Aspects of a society`s rules that concern economic transactions

America vs North Korea

Determines who holds political power and what types of constraints exist on the exercise of that power

Process in which new things replacing old ones and therefore many companies are hurt by the new ideas shutting all the old profitable ones down

Process in which economic growth destabilizes existing regimes and reduces the political power of the ruler

No, most of the aid is taken by politically corrupt leaders

Everyone except
1. Children under 16
2. Institutionalized people
3. Active duty military

Those holding full time or part time jobs

1. Do not have a paid job
2. Actively looked 4 weeks prior
3. Currently available for work

employed+unemployed

unemployed/labor force

labor force/potential workers

-Downward sloping
Cause shifts:
1. Changing output prices
2. Changing demand for the output of good or service
3. Changing technology
4. Changing input prices

-Upward sloping
Cause shifts:
1. Changing tastes
2. Changing opportunity cost of time
3. Changes in population

Competitive equilibrium wage
Supply=demand

Resulting from imperfect information about available jobs and from the time consuming process of job search

Labor supplied is greater than labor demanded

Wages are fixed above the competitive equilibrium level

Workers are highly averse to work for a reduction in their wage

Paying wages above the wage workers were willing to accept, creating more efficiency and profitability