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Macroeconomics Part 1

Macroeconomics Part 1. Chapter 9 October 21, 2009. Productivity. The output of goods and services measured per unit of input by labor, capital, or land. When productivity goes up, more or better products are produced with the same amount of resources. Labor Productivity.

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Macroeconomics Part 1

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  1. MacroeconomicsPart 1 Chapter 9 October 21, 2009

  2. Productivity • The output of goods and services measured per unit of input by labor, capital, or land. • When productivity goes up, more or better products are produced with the same amount of resources.

  3. Labor Productivity • The amounts of goods and services the work force can produce during a given time period – an hour, week, month, or year.

  4. Specialization • A process in which businesses and people focus on producing one or a few parts of an entire product.

  5. Factors of Productivity • The education, training, and attitude of workers. • Quality of management. • Customer satisfaction • High-quality work • Employee involvement • Shared Vision • Quantity and quality of capital resources.

  6. Fixed Costs • Costs that remain the same regardless of the amount of product a firm produces.

  7. Variable Costs • Costs that change with the changing amounts of production.

  8. Total Costs • The sum of total fixed costs and total variable costs. + = Total Costs

  9. Marginal Cost • The additional cost of increasing a unit of production.

  10. Marginal Revenue • The additional revenue generated from the sale of an additional quantity of product.

  11. Total Revenue • Calculation of revenue that is determined by price times quantity sold.

  12. Marginal Analysis • Decision-making that involves comparing marginal (additional) benefits and marginal costs.

  13. Economies of Scale • Reductions in cost resulting from large-scale production.

  14. Inflation • A general rise in overall prices.

  15. Gross Domestic Product (GDP) • The final value of all goods and services produced within a country in a year. • Measured as a total dollar amount. • The indicator of the size of production of an economy. In other words, measuring the productivity of a nation (economy). • Measured by this equation: • GDP = C(Consumption) + I(Business Investment) + G(Government Spending) + NX(Net Exports)

  16. Shortcomings of GDP • Does not include goods and services that people produce but do not sell. • For example, volunteer time to churches or other non-profit organizations. • Does not include the value of illegal activities in the underground economy. This is because illegal activities do not contribute to a nation’s overall well-being. • For example, making and selling drugs • Does not measure most of the goods or services that people produce and consume themselves. • For example child care, meals, and lawn maintenance.

  17. Nominal GDP • Gross Domestic Product reported in current prices.

  18. Real GDP • Gross Domestic Product adjusted for inflation.

  19. Real Per Capita GDP • The Real GDP divided by a country’s population.

  20. The End

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