Refers to the increase in a nation's productive capacity and average standard of living that occurs over a long period of time
the short-run ups and downs, or booms and recessions, in aggregate economic activity
Gross Domestic Product:
The quantity of goods and services produced within a country's borders over some specified period of time.
National Accounting Identity:
Closed country version: Y = C + I + G
(Aggregate real income = aggregate consumption + investment + government expenditures)
Open country version: Y = C + I + G + X - M
(Aggregate real income = aggregate consumption + investment + government expenditures + credit card balances in real terms - money supply)
Explain how non-labor income changes the supply curve of labor:
It increases the "wage" rate. Shown graphically by an upward shift of the supply curve (wage on vertical axis, labor on horizontal.) I.E. the wage a person is willing to work for increases at each hourly rate, therefor a persons desire to work decreases b/c their wage has grown and they can enjoy more leisure.
Explain the aggregate demand curve for labor and where does it come from?
This curve represents the firms demand to hire laborers and comes from the equation MPL = w, meaning that a profit-max'ing firm will set its demand for labor at the level where the marginal product of labor = the wages. Shown graphically by downward sloping demand curve (wage on vertical, labor on horizontal.) Curve is downward sloping b/c as the wages increase, the laborer's MPL decreases.