Econ 102 Ch 7,8,10
Terms
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- Productivity
- the amt. of goods and services produced from each hour of a workers time
- physical capital
- the stock of equiptment and structures that are used to produce goods and services
- human capital
- the knowledge and skills that workers acquire through education, training and experience
- natural resources
- the inputs into the production of goods and services that are provided by nature. i.e: land, rivers, and mineral deposits
- 2 categories of natural resources
- renewable or nonrenewable
- technological knowledge
- society's understanding of the best way to produce goods and serviceds
- quantity of out put =
- available production technology times a gunction of (labor, physical capital, human capital, and natural resources)
- diminishing returns
- the property whereby the benefit from an extra unti of an input declines as the quantity of the input increases
- example of diminishing returns
- when workers have a large quantity of capital to produce goods and services giving them more units of capital increases their productivity only slightly
- catch up effect
- property where countries that start off poor tend to grow more rapidly than countries that start off rich
- foreign direct investment
-
a capital investment that is owned and operated by a foreign entity
e.g.: japan owns a honda plant in US - foreign portfolio investment
-
investment that is fincanced by foreign money but operated by domestic residents
e.g.: British ppl investing in US stock market companies - inward oriented policies
- aimed at raising productivity and living standards within the country by avoiding interaction with the rest of the world.
- # of years needed to double something
- = 70/ growth rate per year
- 4 factors of production
-
1)PHYSICAL CAPTIAL
2)HUMAN CAPITAL
3)NATURAL CAPITAL
4)TECHNOLOGICAL RESOURCES - financial system
- institutions tha match one person's savings with another's investment
- financial markets
-
financial institutions where savers can directly provide funds to borrowers
1.STOCKS
2.BONDS - principal
- when buyer gives their money in exchange for the promise of interested and repayment of original amt. borrowed
- perpetuity
- a bond that never matures but interest is paid on it foever
- default
-
failure to pay interest or principal
-when ppl think that the probability of default is hight they demand higher interest to compensate them - junk bonds
- when financially shaky co.'s try to raise money the pay VERY high interest rates
- tax treatment
-
the way that the tax laws treat the interest earned on a bond
-interest on most bonds is taxable incomes - municipal bonds
-
bond issued by stated and local gov't.
you dont have to pay federal income tax on these - equity finance
-
sale of a stock to raise money
-owner of shares are part owners of company - debt finance
-
sale of bonds to raise money
-owner of bond is creditor of corporation - stock index
- computed as an avg of a group of stock prices
- financial intermediaries
-
financial institutions thru which savers can indirectly provide funds to borrowers
1)BANKS
2) MUTUAL FUNDS - index funds
- mutual funds that buy all the stocks in a given stock index
- open economies
-
interact with other economies around the world
Y=C+I+G+NX - CLOSED ECONOMY
-
ECONOMY THAT DOESNT INTERACT WITH OTHER ECONOMIES
Y=C+I+G - national savings(saving)
-
the total income in the economy that remains after paying for consumption and govt purchases noted by S
S=Y-C-G
S=I
savings=investing - T stands for the amt the govt collects from households minus the amt it pays back
-
-pays back in the form of transfer payments
S=(Y-T-C)+(T-G) - Private saving
-
Y-T-C
the income that the households have left after paying for taxes and consumption - Public Saving
-
T-G
the tax rev. that the govt has left after paying for its spending - Budget surplus and Deficit
-
T-G is pos then govt has an excess of tax rev left over:Surplus
T-G is neg then govt has a shortfall of tax rev from spending: deficit - loanable funds
- refers to all income ppl have chosen to save and lend out rather than use for their own consumption
-
For loanable funds
Savings is the source of_____
Investment is the source of ______ -
Supply
Demand - Supply and Demand of loanable funds depends on the
- real interest rate
- crowding out
- decrease in investment that results from govt borrowing
- According to BLS all adults are either
-
employed
unemployed
not in labor force - unemployment rate=
- (#of unemployed/labor force)x100
- labor force participation rate=
- (labor force/adult pop.)x100
- most spells of unemployment are ____ but most unemployment observed at and given time is ____ _____
-
short
long term - frictional un employment
- unemployment that results b/c it takes time for workers to search for the jobs that best suite their tastes and skills
- structural unemployment
- unemployment that results b.c of the # of jobs abailable in some labor market cant provide a job for everyone that wants one
- sectoral shifts
-
changes in the composistion of demand amoung industries or regions
-they temporarily cause unemployment - efficiency wages affect
-
-worker health
-worker turnover
-worker effort
-worker quality - reservation wage
- the lowest wage a person will accept