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| The total purchases by households, investments, government, and exports |
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| The total production (sales) of all goods and services in a regional economy. Output is a poor measure of economic performance because is double counts intermediate products. |
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| Goods and services produced by industries to be used as inputs in the production of other goods and services. |
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| One year's value of consumption of a durable good or fixed capital asset. |
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| Comparable to GPD. Equivalent to Value Added by all firms before depreciation is deducted. Excludes intermediate inputs and imports |
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| Taxes paid by businesses or hidden within the price of goods or services |
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| Payments to individuals and firms not associated with work or production |
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| NRI plus transfer payments. The amount that individuals allocate to consumption, businesses and individuals to saxes and savings |
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| Taxes levied directly on individuals and businesses |
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| Total individual and corporate savings |
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| Household consumption of goods and services |
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| the non-consumption uses of income, including saving, taxes, and imports |
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| shows the production and distribution of products between industrial sectors of economy |
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| shows the payments made by industry to the factors of production or primary inputs |
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| Final demand consumption of households, government, capital investment, and exports. |
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| redistribution of income between households, governments, and business |
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| The flow of money between production and distribution |
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| the table that shows transaction movements from column sector to row sector or production and distribution |
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The fractional dollar’s worth of an input used to produce one dollar’s worth of output for a sector.
Represents the “production recipe” used to produce output for a given sector of the economy
Assumes a Leontief Production Technology
Also known as direct input coefficients |
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| Leontief Production Technology |
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Assumes inputs are consumed in fixed proportions to produce a given level of output
Analogous to perfect compliments pattern of consumption
Example: Cake Recipe |
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| Technical Coefficient Matrix |
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A matrix or table of technical coefficients for all sectors of the regional economy
Sum of each column of technical coefficients equal one
Also known as direct input coefficient or direct requirements matrix |
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A matrix of multipliers representing the total output of goods and services produced from each sector of economy given a change in final demand
Also known as direct requirements matrix |
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| Output produced to meet initial increase in final demand |
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Output produced to replenish inventories from sectors that provide inputs to the final demand sector
Considered the first round of spending in an economy after initial final demand of output |
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Additional industry effects due to interlinkages between industrial sectors in the economy
Includes all succeeding rounds of industry output after the direct effects |
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| Additional output effects due to household spending |
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| Exogenous changes in final demand from an “impacting” agent resulting in short-run economic changes |
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| Measure the differing impacts between the initial effect and the total effects of a change in final demand |
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Sum of the total output effects for a given sector of the economy
Calculated as the sum of the row elements for a given column in the Leontief Inverse Matrix
Formula |
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Total change in household income from a one dollar change in final demand for a given sector
Calculated as the magnitude of the household element of the Leontief inverse matrix for a given sector |
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Total Change in income from a one dollar final demand income change
Calculated as the total income effect for a given sector divided the household coefficient for that sector from the technical coefficient matrix
Formula |
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| Income level / Poverty Threshold |
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| How many dollars a family’s income is below/above the official poverty threshold |
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| understood without being openly expressed |
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| fully and clearly expressed or demonstrated |
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| a government authority or licence conferring a right or title for a set period, especially the sole right to exclude others from making, using, or selling an invention. |
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| the exclusive legal right, given to an originator or an assignee to print, publish, perform, film, or record literary, artistic, or musical material, and to authorize others to do the same. |
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| a symbol, word, or words legally registered or established by use as representing a company or product. |
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| Concept where new ideas and technologies push out and destroy old ideas and technologies |
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| graphs the cumulative percentage of income in an economy that is owned by a percentage of individuals in that economy |
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| Once a firm starts growing, economies of scale result in the firm having the potential to grow exponentially |
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| Economies of scale internal to the firm as fixed costs are spread out over larger amounts of output produced |
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Labor productivity from “learning by doing” creating “tacit knowledge”
Induced technological progress brought about by technological changes within the growth process, not external as in neoclassical model
External economies resulting from the co-location of similar businesses resulting in increased quantity and quality of physical inputs as well as a skilled labor force |
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| Create urban centers and describe forces that pull economic activity together |
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| Forces that drive economic activity away from the urban center |
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| The ability of local governments to meet their obligations (liabilities) with short run resources (liquid assets) |
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| Current Assets / Current Liabilities |
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| Cash / Current Liabilities |
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| the extent to which an organization supports it's activities using debt |
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| total liabilities/(total assets-total liabilities) |
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| Total liabilities/total assets |
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| increase in net assets/total assets |
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| increase in net assets/assets |
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| Discuss the critiques of the Rostow and Kuznets Stages of Economic Growth/Development Theory. |
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| Previous theories (Rostow-Kuznets, Lewis Structural Change) were inductive theories of growth based on evaluating history. They need an alternative theory of growth that individual behavior can impact and can be used for predictive purposes. |
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| Discuss the critiques of the Neoclassical Theory of Growth. |
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It is often thought of as labor augmenting; that is, increases in technology increase the productivity of the labor force, or the amount of effective labor that is applied
As a result, growth in output can occur in the economy.
This can result in a constant growth, or an increase in the growth rate can occur with increases in technology applied in the economy
Unfortunately neoclassical growth theory assumes that technological growth occurs without deliberate actions of economic actors; that is, it occurs in “thin air” |
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| Discuss the issue of convergence in Neoclassical Growth Theory. |
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Internationally, neoclassical growth theory would predict that the growth rates of countries would “converge” as the private sector would transfer capital investment from countries with lower returns to capital (developed countries at or near their steady state capital investment) to countries with higher returns to capital (typically developing countries with lower initial capital investment).
Unfortunately, empirical data suggest that absolute convergence does not occur across countries; that is rich countries are getting richer and poor countries poorer
Some research has found some evidence for “conditional convergence” based on the level of education and technological investment in the economies of countries |
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| How does economic growth occur in the Romer Growth Model? Explain the key input(s) and key outputs of the model. |
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Increased knowledge results in technological advancement and economic growth
Focus on investments in knowledge through two sources
Investment in Human Capital through Education (Tacit Knowledge)
Investment in Research and Development to generate new discoveries (Explicit Knowledge)
Investments in R&D create new innovations or “knowledge”
Economic profits from intellectual property protection reinvested in R&D to produce new innovations – “feedback effect” – the endogeneity of technological advancement
New innovations increase the quantity and quality of goods and services used in production and consumption |
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| Describe why urban areas may have an advantage in knowledge creation over rural areas. |
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| The centripetal forces for urban centers concentrate economic activity together. The knowledge spillovers between businesses and individuals and the increase in labor force migration create a better environment for knowledge creation |
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| Discuss the different factors that create centripetal and centrifugal forces in an economy. |
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3 Types of centripetal forces
Market size external economies
Forward and backward linkages between firms and labor markets with many different occupations
Natural site advantages
Include such examples as natural harbours and access to navigable rivers, or other central locations
Pure external economies
Knowledge spillovers between businesses and individuals
3 Types of centrifugal forces
Dispersed natural resources
Market mediated forces
Higher transportation costs (poor transportation infrastructure) and urban land rent
Nonmarket forces
Negative externalities such as pollution and congestion |
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| Explain the circular flow of money within a regional economy. |
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Money follows circular pattern from production to consumption back to production
There are linkages and leakages within regional economy. Households, companies, and governments participate in the consumption. The consumption expenditures of these socio-economic groups form the capital for the production activities. The value added by the production sectors pay the wages, profits, rents, interest, and taxes for the production sector. These expenditures are distributed as incomes for the socio economic groups for consumption. |
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| Explain the Leontief Production Technology. In your explanation, discuss the assumptions of the production technology as well as the structure of substitutability between inputs. |
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| The Leontief Production Technology assumes inputs are consumed in fixed proportions to produce a given level of output. The inputs are assumed to be perfect complements in a pattern of consumption |
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| Using an example, discuss the differences between elements of the Technical Coefficients Matrix and elements of the Leontief Inverse Matrix. |
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| The technical coefficient matrix is a matrix or table of technical coefficients for all input sectors of the regional economy while the Leontief Inverse Matrix is a matrix of multipliers representing the total output of goods and services produced from each sector of economy given a change in final demand. |
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| Describe the multiplier process in an economy from an initial final demand change. In your answer, include a discussion of the round-by-round effects. |
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| A multiplier measures the differing impacts between the initial effect and the total effects of a change in final demand. In economics, a multiplier is a factor of proportionality that measures how much an endogenous variable changes in response to a change in some exogenous variable.This exponential effects of these multipliers is the multiplier process. The round by round effect is the percent of total Leontief Inverse shown by through each round of spending using the multiplier |
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| Describe why one may prefer to use an income multiplier or value added multiplier over an output multiplier. |
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| The output multiplier measures the total output effect for a given sector, while the the income multipliers measure total income effect for a given sector divided the household coefficient for that sector from the technical coefficient matrix.The Income and Value added effects captures contribution to the pocketbooks of households and business from final demand change. Income Multipliers show how much additional income is generated from the direct effect on income of a final demand change. The output multipliers are most often cited in media but overstate impact due to double counting. |
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| Interpret values from a completed technical coefficient matrix and Leontief Inverse Matrix that includes Total Output Multipliers and Total Income Multipliers. |
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| How might an individual in a county/parish benefit differentially from a state or federal government public asset located in their county/parish than a general resident of the state or nation? |
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| Money follows circular pattern from production to consumption back to production. Many linkages and leakages take place within a regional economy. The funding of a federal asset is probably paid for by the federal government, which is most likely spent locally. These linkages and leakages affect the individuals locally first, if they ever do affect the individuals outside of this region. Public sector assets for a state or nation are not distributed geographically in the same proportion as the population. |
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| Discuss when financial wealth is real wealth versus being an intermediate form of capital. |
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| Financial wealth is real wealth when is has been adjusted to remove the effects of general price level changes over time and includes assets both liquid and non-liquid as opposed to capital which is only liquidated money for trade, and investments and owned by legal entities. Financial capital represents an intermediate form of capital before its investment into real (non-financial) capital. |
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| When might it make more sense to hold liquidity through a line of credit versus holding liquidity in the form of cash for the public sector? |
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| Counties should consider incorporating risk in evaluating their public sector’s overall fiscal health. The choice is likely a function of the fiscal health of the local public sector entity and the return liquidity provides in managing disaster expenses. If the federal government can potentially help or reimburse the local government, then the expenditures can be financed using credit. where cost savings exceed the cost of obtaining liquidity externally (e.g., interest payment on a line of credit), then a line of credit sufficiently large to execute those transactions should be considered |
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