Invisible hands
Great depression
Classical economics
Keynesian economics
Circular flow revisited
The behavior of the Canadian economy
Invisible hand- the term used by Adam Smith to describe the market mechanism.
Great Depression- a period of severe economic slump lasting 10 years from 1929 to 1939.
Classical economic models- pre- Keynesian economic model that emphasized the market forces of demand and supply. It predicts that unemployment would cause wages to fall. The fall in wages would be an incentive for employers to hire more workers until the unemployment workers were all hired.
Fiscal policy- the use of government spending and taxes to regulate economic activity.
Keynesian economics- economics based on the premise that total output is determined by total spending. It emphasizes the demand side of the economy.
Stagflation- the simultaneous occurrence of high rates of inflation and high rates of unemployment.
Supply side- the production of cost side of the economy.
New classical economists- economists who emphasize wage and price flexibility and believe in rapid macroeconomic adjustment.
New Keynesian economists- economists who emphasize wage and price inflexibility and believe that markets can fail to adjust.
Macroeconomic policy- deliberate government action taken to achieve economic objectives.
Monetary policy- action taken by the central bank to change the money supply and interest rates to achieve economic objectives.
Income policies- actions taken by the government to control wages and prices to achieve economic objectives.
Transfer payments- payments that do not represent compensation for goods or services.
Consumer price index(CPI)- an index that measures the level of the prices of consumer goods and services.
CH5
The Output of a Country
-Double counting
Transfer Payments
Income Approach
Expediture Approach
National income accounting- the process of collecting, measuring, and recording data on the economy’s output.
Statistic Canada- the special federal government agency responsible for collecting and publishing national economic and social statistic.
Double counting counting an item more than once when measuring GDP.
Value added- the difference between the value of the output and the cost of the inputs.
Intermediate product- the outputs of one firm of industry that are used as inputs by other firms of industries.
Private transfer payments- transfers of purchasing power from one individual or group to another for which no gods and services are produced. (grants student, parents give to child)
Government transfer payments- payments made by the fovernment that do not represent payment for productive services(employment insurance payments, welfare payments, old age security payments.)
Income approach- a method of calculating GDP that involves measuring the total income generated in the process of producing the economy’s good and services.
Expenditure approach- a method of calculating GDP that involves measuring the total amount spent on the economy’s good and services.
TOTAL EXPENDITURE=TOTAL INCOME
Disposable income- aftertax income that an individual can spend of save.
Personal saving- the part disposable income not spent in consumer goods and services.
Base year of base period- a year chosen as a reference point against which other years are measured.
Price indexes- numbers that measure changes in prices over time.
Nominal GDP- expressed in current dollars
Real GDP- expressed in constant dollars.
Underground economy- all economic activities that are not reported to government and on which no taxes are paid.
Human Development Index (HDI) – a composite index designed to measure human well-being in a country.
CH6
Types of unemployment
Measuring unemployment
-Underemployment
-Discourage worker
Output gap
-Actual output vs. potential GDP