Summary Trade and money

A snapshot of the summary - Trade and money

• Chapter 22: Economic growth

• What is potential GDP?

  potential GDP is the level of real GDP when the quantity of labor employed is at full employment
• What is the relationship of labor demanded

  that is the relationship between the quantity of labor demanded (hired) and the real wage rate (price level).
• 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.
• What changes potential GDP? (change in supply of labor)

  - average hours worked per worker 
  - working age population 
  - employment rate 

• finance, savings and investment

• What is financial capital

  funds that firms use to buy physical capital and that household use to buy a home or to invest in human capital
• name three sources of funds who finance investment

  1. Household savings (C+S=T)
  2. Government budget surplus (T-G)
  3. National savings 
• Funds are supplied and demand with these three types

  1. 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)
• Name 4 key types of financial institutions

  1. 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)