Chpt 14

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Chapter 14

Macroeconomics: Issues and Problems


Chapter Contents


Introduction

Macroeconomic Goals

Economic Growth

Full Employment

Price Stability

Macroeconomic Tools

The Rise of Pax Americana: 1946 to the 1960s

The Decline of Pax Americana: 1970s to mid
-
1
980s

The U.S. Economy: Late 1980s and Early 1990s

The U.S. Economy: 1992 into the Next Millennium

National Accounting Measures

Potential Problems with the National Income Accounts

Real versus Nominal GDP

Value
-
Added Counting

What Is Counted in GDP?

Conclus
ion

Review Questions


Objective


This is a long chapter introducing you to key macroeconomic variables including unemployment,
inflation and GDP. You should understand how unemployment is measured in the United States, some
of the problems with this measu
rement technique, and the costs of unemployment. Less detail is
provided about the measurement of inflation. You are presented with the full national income account
formulation. The text emphasizes real GDP, value
-
added in measuring GDP, and what is counte
d in
GDP. Finally, recent macroeconomic history is summarized so you will know key events in the
business cycle since World War II.



Key Terms:
(from Riddell text)


Economic Growth

Gross Domestic Product (
GDP
)

Full Employment

Unemployment

Frictional Unem
ployment

Seasonal Unemployment

Structural Unemployment

Cyclical Unemployment

Hidden Unemployment

Discouraged Workers

Involuntary part
-
time Workers

Underemployed

Inflation

Consumer Price Index (
CPI
)

Monetary Policy

Fiscal Policy

Personal Consumption
Expendi
tures (
C

)

Government Consumption &
Investment (
G
)

Gross Private Investment (
I
)

Net Exports (
X
-
M
)

Real GDP

Nominal GDP

Capital Consumption Allowance

Net National Product (
NNP
)

Indirect Business Taxes

National Income (
NI
)

Short Essay Questions:

(If page number follows question, question is an in
-
chapter boxed question and can found on page indicated. If
no page number given, then question is from end of
chapter review)


1.

Does it make any difference how we count the unemployed?
Explain?
P
age
327

2.

Which of the three macroeconomic goals


growth,

full employment, or price stability


is
most important
to you? Why?
I
f
you could add

another goal to this list,
what would it be?
Explain
?

P
age
330

3.

The three goals are often at odds with one another. Has the relative emphasis of these different goals
changed over time? Why?

4.

Do
policy

measures aimed at alleviating one set of economic problems sometimes make the othe
rs
worse? Give an example

5.

In
addition

to
those

in the text, can you give
at least
two

other examples in which individual or societal
welfare is diminished but GDP is increased?
P
age
342