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A snapshot of the summary - Trade and money
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Chapter 22: Economic growth
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What is potential GDP?potential GDP is the level of real GDP when the quantity of labor employed is at full employment
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What is the relationship of labor demandedthat is the relationship between the quantity of labor demanded (hired) and the real wage rate (price level).
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what is the relationship of the supply of labor?the relationship of supply of labor is the relationship between quantity of labor supplied and the real wage rate. Supply= the labor hours the households are planning to work.
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What changes potential GDP? (change in supply of labor)- average hours worked per worker
- working age population
- employment rate -
finance, savings and investment
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What is financial capitalfunds that firms use to buy physical capital and that household use to buy a home or to invest in human capital
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name three sources of funds who finance investment1. Household savings (C+S=T)
2. Government budget surplus (T-G)
3. National savings -
Funds are supplied and demand with these three types1. Loan Market
2. Bond market
3. Stock market -
What is the equation of net worth (solvency)net worth= market value assets (lent) - market value liabilities (borrowed)
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Name 4 key types of financial institutions1. commercial banks
2. mortgage companies
3. pension funds
4. insurance companies -
how is the wealth of the end of the year calculated?wealth beginning of the year + savings during the year
(income - consumption expenditures)
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