Macroeconomics

• Labour force participation rate is calculated as (Labour force/ Working-age population) x 100
• Labour force participation rate

  The percentage of the working-age population who are members of the labour force
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• what is GDP?

  Gross Domestic Product is the value of all final goods and services produced in a country withim a given year or quarter
• What is a final good

  A final good is a good bought by its final user
• What are the factors of production

  Land, labour, capital and entrepreneurship
• Where are the factors of production sold and bought

  The factor market
• What is consumer expenditure

  The total payment of consumer goods and services made to the goods market
• What is investment?

  The purchase of buildings and eq by firms
• What is the formula for net exports

  Exports-Imports (X-M)
• What is the formula for GDP

  Y = C + I + G + X-M
• What is depreciation

  The decrease in the value of a firms capital due to wear and tear and obsolescence
• What are the two ways of measuring GDP

  Expenditure approach

  Income approach
• What is the expenditure approach

  The sum of the red/right flow

  C+I+G+X-M
• What is the income approach

  The sum of the left/blue flow

  Wages + Other factors eg. rent, profit, salaries, interest
• How do you find nominal GDP

  Multiply Quantity x Price of every item and add them all
• What’s the formula for real GDP per person

  GDP/population
• What is the Lucas wedge

  The dollar value of the accumulated gap between the potential GDP and the real GDP
• What is the labour force


  The labour force is the sum of employed and unemployed workers
• Define unemployment rate

  The percentage of the labour force that is unemployed
• Define Labour force participation rate

  Percentage of the working age population in the labour force
• Define Employment rate

  The percentage of the working age population with jobs
• Define frictional unemployment

  Unemployment that rises from labour market turnover
• Define structural unemployment

  Unemployment that rises from advances in tech and competition
• Define Cyclical unemployment

  Unemployment due to recessions and getting hired when there’s an expansion
• Define natural unemployment rate


  Natural unemployment/Labour force x 100
• Define full employment

  When natural unemployment = Unemployment rate
• Define output gap

  Real GDP - Potential GDP
• Define price level

  The average level of prices
• Define inflation

  Persistently increasing price levels
• Define deflation

  Persistently decreasing price levels
• An increase in demand and supply affects equilibrium price and quantity in what ways

  Increases equilibrium quantity but the price is uncertain
• A decrease in demand and supply affects equilibrium price and quantity in what ways

  Decreases equilibrium quantity but price is uncertain
• A decrease in demand and increased in supply does what to equilibrium

  It lowers equilibrium price but equilibrium quantity is uncertain
• An increase in demand and decrease in supply does what to equilibrium

  It increases equilibrium price but equilibrium quantity is uncertain
• What is R1


  Long term unemployment (15 weeks+)
• What is R2


  Short term unemployment
• What is R3


  Unemployment rate comparable to the US
• R4?


  Official unemployment rate
• R5?


  Unemployment rate + Discouraged workers