economics midterm 3
Terms
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- marginal product of labor (MPL)
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increase in the amount of output from an additional unit of labor.
ΔQ/ΔL - value of the marginal product of labor (VMPL)
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the marginal product of an input times the price of the output.
P x MPL
marginal profit = VMPL - W - utilitarianism
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maximize the total utility of everyone in society. (a dollar means more to a poor person then a rich person). also problem of leaky bucket - will not try to reach complete equality.
j. bentham and john stuart mill - liberalism
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chose policies that are just if behind a "veil of ignorance". aka help the poor, redistribute even if it is a leaky bucket.
john rawls - libertarianism
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punish crimes and enforce voluntary agreements, but not redistrute income. don't care about equality, what one owns is his.
robert nozick - GDP
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the market value of all final goods and services produced within a country in a given period of time.
Y = C + I + G + NX (exports-imports) - nominal GDP
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production of g & s at current prices.
sum of price x quanity - real GDP
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production of g & s at constant prices.
sum of price from base year x quantity - GDP deflator
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reflects g & s but not quantities produced.
= (nominal GDP/Real GDP) x 100 - consumer price index (CPI)
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measure of overall cost of g & s bought by a typical consumer.
1. determine basket
2. find price of each good
3. compute cost of total basket
4. choose base year and compute CPI in each year
(basket of year z/basket of base year) x 100
5. use CPI to compute interest rate (%Δ of price index)
inflation in year z
= (CPI year z - CPI year y)/(CPI year y) x 100 - two types of inflation rates
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nominal: w/o correction for inflation effects
real: corrected for effects of inflation
real = nominal - inflation rate - national saving (saving)
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total income in the economy that remains after paying for consumption and gov purchases.
S = I - private saving
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private = income that households have left after paying for taxes and consumption
(Y - T - C)
S = (Y - T - C) + (T - G)
T is gov tax revenue minus transfer payments (SS, welfare) - public saving
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public = the tax revenue that the government has left after paying for spending
(T - G)
S = (Y - T - C) + (T - G)
T is gov tax revenue minus transfer payments (SS, welfare)