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Exam 2 Study Guide Eco2013, Study notes of Macroeconomics

Exam 2 Study Guide Eco 2013 2025

Typology: Study notes

2024/2025

Uploaded on 04/21/2025

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🏦
1. What’s the main purpose of GDP accounting?
👉
Answer: To measure the economic performance of a country.
💡
Think of GDP like a report card for a country’s economy—how much stuff it makes and
how well it's doing.
📉
2. Why are unemployment and inflation big economic problems?
👉
Answer: They are the main problems that arise from business cycles.
💡
Memory tip: “Boom and Bust = Job Dust and Price Rush”
(When the economy goes up and down, jobs and prices get messy.)
󰠻
3. What is unemployment?
👉
Answer: Needing to be looking for a job.
💡
If you’re jobless but not looking, you're not “unemployed” in economics. You gotta be
actively searching.
💔
4. What are the consequences of unemployment?
👉
Answer: Not utilizing the skills and talent of its most important factor of production.
💡
People are the MVPs of production—unemployment = talent wasted.
👥
5. What is the labor force?
👉
Answer: People who are either employed or unemployed (but actively looking).
💡
Labor force = working + looking. Not just adults, not just jobs, but people involved in
the game.
👥
6. Who is in the labor force?
👉
Answer: Employed people and unemployed people (those looking for a job).
💡
Think: "On the job or on the hunt."
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🏦 1. What’s the main purpose of GDP accounting?

👉 Answer: To measure the economic performance of a country. 💡 Think of GDP like a report card for a country’s economy—how much stuff it makes and how well it's doing.

📉 2. Why are unemployment and inflation big economic problems?

👉 Answer: They are the main problems that arise from business cycles. 💡 Memory tip: “Boom and Bust = Job Dust and Price Rush” (When the economy goes up and down, jobs and prices get messy.)

󰠻 3. What is unemployment?

👉 Answer: Needing to be looking for a job. 💡 If you’re jobless but not looking, you're not “unemployed” in economics. You gotta be actively searching.

💔 4. What are the consequences of unemployment?

👉 Answer: Not utilizing the skills and talent of its most important factor of production. 💡 People are the MVPs of production—unemployment = talent wasted.

👥 5. What is the labor force?

👉 Answer: People who are either employed or unemployed (but actively looking). 💡 Labor force = working + looking. Not just adults, not just jobs, but people involved in the game.

👥 6. Who is in the labor force?

👉 Answer: Employed people and unemployed people (those looking for a job). 💡 Think: "On the job or on the hunt."

💼 7. What’s included in GDP?

👉 Answer: Market activities, composition of GDP, etc. 💡 If money changed hands in the market, it’s probably in GDP.

🚫 8. What’s excluded from GDP?

👉 Answer: Leisure, non-market activities, underground economy. 💡 GDP doesn't count side hustles under the table, chores, or chill time.

🚷 9. Who is excluded from the labor force?

👉 Answer: Under 16 years and institutionalized (e.g., prison, military, hospitals). 💡 Too young or locked in = not in.

🧮 10. Unemployment rate formula?

👉 Answer: UR = Unemployed / Labor Force 💡 Remember: It's not about the total population—just those in the game.

📊 11. Bureau of Labor Statistics (BLS) role?

👉 Answer: Collects and reports data on employment, unemployment, etc. 💡 BLS = The scorekeeper for America’s job game.

🧠 12. How many types of unemployment?

👉 Answer: 4 (Frictional, Structural, Cyclical, Seasonal – but this quiz focuses on 3)

🔄 13. Frictional Unemployment?

🧾 20. Two ways to calculate GDP?

👉 Answer: Expenditure Approach, Income Approach 💡 Spending vs. Earning – two ways to count the same dollar.

💰 21. What is the expenditure approach?

👉 Answer: GDP = C + Ig + G + Xn (Consumer + Business Investment + Government + Net Exports)

🏦 22. What does the income approach measure?

👉 Answer: Total income from producing final goods/services 💡 Follow the money from business profits, wages, rents, etc.

🧾 23. Components of income approach?

👉 Answer: National Income + Sales Taxes + Depreciation + Net Foreign Factor Income

🛍 24. Why include final goods in GDP?

👉 Answer: They’re the end product. 💡 Only count the pizza, not the flour, cheese, and sauce separately.

🚫 25. Why exclude transfer payments (like Social Security)?

👉 Answer: They aren’t payments for goods/services. 💡 Money moving around ≠ production happening.

🌎 26. NFFI = GNP - GDP?

👉 Answer: True 💡 GNP includes income from citizens abroad. GDP doesn’t.

📈 27. What is core inflation?

👉 Answer: Inflation without food and energy prices. 💡 Strips out price “noise” to show the real trend.

🥘 28. Why exclude food and energy?

👉 Answer: They're volatile (change a lot). 💡 Gas and groceries are drama queens—too unpredictable.

✅ 29. Core inflation is a more stable measure?

👉 Answer: True 💡 It’s like checking your weight without the water weight. More reliable.