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This document outlines the key topics covered in ECO100 Test 2, including the four main goals of macroeconomics, injections and the circular flow diagram, methods for calculating GDP, types of unemployment such as cyclical and disequilibrium unemployment, monopolies and market-clearing prices, issues governments try to address through macroeconomic policy, and causes of disequilibrium unemployment. It provides definitions and examples for many of these macroeconomic concepts.
This document outlines the key topics covered in ECO100 Test 2, including the four main goals of macroeconomics, injections and the circular flow diagram, methods for calculating GDP, types of unemployment such as cyclical and disequilibrium unemployment, monopolies and market-clearing prices, issues governments try to address through macroeconomic policy, and causes of disequilibrium unemployment. It provides definitions and examples for many of these macroeconomic concepts.
This document outlines the key topics covered in ECO100 Test 2, including the four main goals of macroeconomics, injections and the circular flow diagram, methods for calculating GDP, types of unemployment such as cyclical and disequilibrium unemployment, monopolies and market-clearing prices, issues governments try to address through macroeconomic policy, and causes of disequilibrium unemployment. It provides definitions and examples for many of these macroeconomic concepts.
a. The goal of faster growth may conflict with that of greater equality. Example: Goal of lower unemployment may conflict with that of lower inflation (in the short run) b. Opportunity Cost > Trade Of In firms and industry, the cost of achieving one objective may be achieving less of another. In national policies term, it is known as Trade Of. i. Policy makers must make choices (although most of the times policies benefit a group of people and hurt the other) 2. Injections is an expenditure on the production of domestic firms coming from outside the inner flow of the circular flow of income. 3. Circular flow-diagram a visual model of the economy, shows how dollars flow through markets among households and firms. 4. GDP 3 Methods of calculating a. Product approach: the dollar amount of output produced. b. Income approach: the dollar incomes generated by production. c. Expenditure approach: the dollar amount spent by purchasers. i. GDP = C + I + G + (X- M) C = Private consumption expenditure I = Investment Expenditure G= Government Consumption Expenditure X = Value of Exports M = Value of Imports 5. Disequilibrium of labor a. Disequilibrium Unemployment i. Happens when there are externalities such as the state of national economic, government intervention, or shortage surplus in labor supply b. Equilibrium Unemployment i. Happens when a particular industry expand / contract ii. People leaving jobs whether voluntary or involuntary due to internal factors 6. Cyclical unemployment: unemployment caused by a decline in economic activity. a. The demand for products decreases and workers get laid of. b. Results in an excess supply of workers for the remaining available jobs. c. The economy must grow at least as fast as the labor force to avoid cyclical unemployment
7. A monopoly is a firm that is the sole seller of a product
without close substitutes. 8. A market-clearing price is the price of a good or service at which quantity supplied is equal to quantity demanded, also called the equilibrium price. 9. Governments try to deal with the following 4 major issues in macroeconomic: a. High and stable economic growth b. Low unemployment c. Low inflation d. Avoid balance of payments deficits and excessive exchange rate fluctuations 10. Societys Tradeofs between economic goals 11. Know the cicular flow diagrams and label
12. a.
b.
c.
13. a.
3 Possible causes of disequilibrium of unemplyement
Real Wage (Classical) Unemployment i. Disequilibrium unemployment caused by real wages being driven up above the market clearing level. Demand Deficient / Cyclical Unemployment i. When economy moves into recession, consumer demand falls, thus firms are forced to cut back on labor Growth in the Labor Supply i. Happens when labor supply rises with no corresponding increase in the demand for labor, the equilibrium real wage rate will fall Types of Unemployement Claimant unemployment
ECO100 Test 2 Jonathan Halim
i.
Refers to those in receipt of unemployment
related benefits ii. Occurs only in certain countries such as Australia and UK b. Standardized unemployment rate i. Refers to those of working age who are without work, available to start work within 2 weeks, and actively seeking employment or waiting to take up an appointment