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Econ Test 2 Review.docx

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McMaster University
Bridget O' Shaughnessy

Econ Test 2 Review Chapter 7 Productivity: the quantity of goods and services produced from each hour of a worker’s time Determinants of Productivity Physical Capital: the stock of equipment and structures that are used to produce goods and services Human Capital: the knowledge and skills that workers acquire through education, training and experience Natural Resources: the inputs into the production of goods and services that are provided by nature, such as land, rivers, and mineral deposits Technological Knowledge: society’s understanding of the best ways to produce goods and services Diminishing Returns: the property whereby the benefit from an extra unit of an input declines as the quantity of the input increases Catch-up Effect: the property whereby countries that start off poor tend to grow more rapidly than countries that start off rich. Investment from Abroad: Foreign Direct investment: a capital investment that is owned and operated by a foreign entity Foreign Portfolio Investment: an investment that is financed with foreign money but operated by domestic residents Education- investment in human capital Health and Nutrition: investment in human capital Chapter 8 Financial System: the group of institutions in the economy that help to match one person’s saving with another person’s investment Financial Markets: financial institutions through which savers can directly provide funds to borrowers Bond: a certificate of indebtedness Stock: a claim to partial ownership in a firm Financial Intermediaries: financial institutions through which savers can indirectly provide funds to borrowers Mutual Funds: an institution that sells shares to the public and uses the proceeds to buy a portfolio of stocks and bonds GPD= consumption + investment + government purchases + net exports Closed Economy: an economy that does not interact with other economies Open Economy: an economy that interacts with others around the world National Saving: the total income in the economy that remains after paying for the consumption and government purchases- equation Y-C-G=saving, or investments= national saving Private saving: the income that households have left after paying for taxes and consumption (Y-T-C) Public saving: the tax revenue that the government has left after paying for it’s spending (T-G) Budget surplus: an excess of tax revenue over government spending (T-G) Budget deficit: a shortfall of tax revenue from government spending Market for Loanable Funds: the market in which those who want to save supply funds and those who want to borrow or invest demand funds Government Debt: the sum of all past budget deficits and surpluses Crowding Out: a decrease in investment that results from government borrowing Government net debt: the difference between the value of government financial liabilities and financial assets Labour force: the total number of workers, including both the employed and the unemployed Unemployment rate: the percentage of the labour force that is unemployed Labour-force participation rate: the percentage of the adult population that Is in the labour force Discouraged searchers: individuals who would like to work but have given up looking for a job. Natural rate of unemployment: the rate of unemployment to which the economy tends to return in the long run Cyclical unemployment: the deviation of unemployment from its natural rate Frictional Unemployment: unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills Structural unemployment: unemployment that results because the number of jobs available in some labour markets is insufficient to provide a job for everyone who wants one Job search: the process by which workers find appropriate jobs given their tastes and skills Employment Insurance: a government program that partially protects workers incomes when they become unemployed Union: a worker association that bargains with employers over wages and working conditions Collective Bargaining: the process by which unions and firms agree on the terms of employment Strike: the organized withdrawal of labour from a firm by a union Efficiency Wages: above equilibrium wages paid by firms in order to increase worker productivity Worker Health: is related to the wage in theory a higher paid worker will be healthier Worker turnover: in theory the higher the wages the less worker turnover, also worker effort, and worker quality. Chapter 10 Medium of Exchange: a
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