Term
|
Definition
| Alternating rises and declines in the level of economic activity over a period of time, with individual cycles varying in intensity and duration. |
|
|
Term
|
Definition
| State in which a person cannot get a job despite being willing to work and actively seeking employment. |
|
|
Term
|
Definition
| An increase in the overall level of prices that may diminish an individual's purchasing power and lower the standard of living if income does not increase accordingly. |
|
|
Term
|
Definition
| The annual increase in output per person that outpaces the increasing population, improving the standard of living such that it doubles every 35 years. |
|
|
Term
|
Definition
| Occurs when current consumption is less than current output, requiring sacrifices to be made. |
|
|
Term
|
Definition
| Occurs when resources are dedicated to increasing future output that is determined by the amount of saving that society does. |
|
|
Term
|
Definition
| The prediction of future economic trends that affects current economic behavior |
|
|
Term
|
Definition
| Situations in which a firm's expectations are unmet as they were expecting one thing to happen and something else occurred. Typically shocks occur on the demand side. |
|
|
Term
|
Definition
| Store of output that has been produced but not yet sold that enable the firm to operate at its optimal output when demand shocks occur |
|
|
Term
| Inflexible "Sticky" Prices |
|
Definition
| Explains how unexpected changes in the demand lead to fluctuations in the GDP and unemployment that occur during a business cycle as the firm is essentially at the mercy of the market. The firm is not able to operate at its optimal output and will incur greater costs. |
|
|
Term
|
Definition
| Prices that adjust quickly to changes in the supply or demand that enable firms to continue operating at their optimal output as the market prices will adjust. |
|
|
Term
| National Income Accounting |
|
Definition
| Measures the economy's overall performance and enables assessment of the health of the economy via comparison of production levels, tracking the growth of the economy in the long-run, and formulation of policies to safeguard and improve economic health. |
|
|
Term
| Gross Domestic Product (GDP) |
|
Definition
| Defines aggregate oputput as the dollar value of all final goods and services produced within a nation over a specific period of time, serving as a monetary measure of economic health. |
|
|
Term
|
Definition
| Inclusion of the monetary value of intermediate goods and final goods that distorts the GDP as the value of intermediate goods is included in the value of the final product. |
|
|
Term
|
Definition
| Products that are bought for resale or further manufacturing such as crude oil in the gasoline industry. |
|
|
Term
|
Definition
| Products that are purchased by the end user and are comprised of intermediate goods such as gasoline in the gasoline industry. |
|
|
Term
|
Definition
| The market value of a firm's output less the values of the inputs the firm has bought from others at each production stage, which when added, ammounts to the correct value of the GDP. |
|
|
Term
| Nonproduction Transactions |
|
Definition
| Monetary transactions that do not involve final goods and services, and as such, are not included in the GDP because they do not contribute to the generation of final products. |
|
|
Term
|
Definition
| Government payments made to people that do not add to the current production and would overstate the GDP if counted (i.e. Social Security). |
|
|
Term
| Private Transfer Payments |
|
Definition
| Transfer of funds from one private individual to another that do not enter into the GDP. |
|
|
Term
| Stock Market Transactions |
|
Definition
| The buying and selling of stocks and bonds that do not contribute to the GDP. |
|
|
Term
|
Definition
| Resale of a final good not included in the GDP as it was alread counted earlier and is not part of the current production. |
|
|
Term
|
Definition
| Views GDP as the sum of all money spent buying it, including consumption expenditures of households, investments made by businesses, government purchases of goods, and expenditures of foreigners. |
|
|
Term
|
Definition
| Views GDP in terms of income derived from producing it, including wages, rent, interest, profits, and statistical adjustments. |
|
|
Term
| Personal Consumption Expenditures (C) |
|
Definition
| All expenditures by households on goods and services. |
|
|
Term
|
Definition
| Comprise 10% of personal consumption expenditures as they are goods with expected lifespans of three or more years. |
|
|
Term
|
Definition
| Comprise 30% of personal consumption expenditures as they are goods with expected lives less than three years. |
|
|
Term
|
Definition
| Make up the remaining 60% of personal consumption expenditures as this is the work done by others for another person. |
|
|
Term
| Gross Private Domestic Investment (Ig) |
|
Definition
| Includes final purchases of machinery and equipment made by businesses, all construction, and changes in inventories. |
|
|
Term
| Net Private Domestic Investment |
|
Definition
| Includes only investments in the form of added capital that is the gross private domestic investment less depreciation. |
|
|
Term
|
Definition
| Expenditures for goods and services that government consumes in providing public services as well as the expenditures for publicly owned capital such as schools and hospitals. |
|
|
Term
|
Definition
| Exports less imports, which considers only expenditures made on domestically produced goods |
|
|
Term
|
Definition
The total of all sources of private income (employee compensation, rents, interests, proprietor's income, and corporate profits) plus government revenue from taxes on production and imports.
NI = NDP - Statistical Discrepancy + Net Foreign Factor Income |
|
|
Term
| Taxes on Production and Imports |
|
Definition
| Indirect business taxes such as general sales taxes, excise taxes, business property taxes, license fees, and custom duties that are considered when calculating GDP as they flow as revenue (income) to the government. |
|
|
Term
| Consumption of Fixed Capital |
|
Definition
| Huge depreciation charge made agaisnt private and publicly owned capital each year that is the allowance for capital "consumed" by producing the GDP and added to the national income. |
|
|
Term
| Net Domestic Product (NDP) |
|
Definition
Measures the total annual oputput that the entire economy can consume without impairing its capacity to produce in ensuing years.
NDP = GDP - Depreciation |
|
|
Term
|
Definition
Includes all income received whether earned or unearned and can be calculated from the national income by subtracting income earned but not received and adding income received but not earned.
PI = NI - Taxes on Imports - Social Security Contributions - Corporate Income Taxes - Undistributed Corporate Profits + Transfer Payments |
|
|
Term
|
Definition
Personal income less personal taxes that is the amount of income households have left after taxes to use in consumption and saving.
DI = PI - Personal Taxes |
|
|
Term
|
Definition
| GDP based on the prices the prevailed when output was produced and is thus unadjusted. |
|
|
Term
|
Definition
| GDP that has been deflated or inflated to reflect changes in the price level, permitting comparison over time. |
|
|
Term
|
Definition
Measure of the price of a specified collection of goods, the "market basket", in a given year compared to the price of an identical assortment of goods in a reference year.
Price Index = [Price of Market Basket in Specific Year / Price of Market Basket in Base Year] x 100
Real GDP = Nominal GDP / Price Index in Hundredths |
|
|
Term
|
Definition
| Calculated as a percentage rate of growth per quarter in either real GDP or real GDP per capita. Economic growth lessens the burden of scarcity and betters the standard of living. |
|
|
Term
|
Definition
The amount of real output per person in a country that is superior for comparing living standards.
GDP Per Capita = Real GDP/Population |
|
|
Term
|
Definition
Mathematical approximation that predicts the number of years it will take for some measure to double given its annual percentage increase.
Years to Double GDP = 70/Annual Percentage Rate of Growth |
|
|
Term
|
Definition
| The richest natinos that have a small annual average rate of growth (2-3%) becuase the implementation and creation of new technology is slow and costly. |
|
|
Term
|
Definition
| Poorer nations with the ability to grow rapidly as they can simply adopt existing technologies from rich leader countries without incurring the cost of innovation. |
|
|
Term
|
Definition
| Changes int he phsyical and technical agents of production that enable an economy to expand the GDP, including increases in the quantity and quality of natural resources, quantity and quality of human resources, increases in stock of capital, and improvements in technology. |
|
|
Term
|
Definition
| To achieve higher production potential created by the supply factors, households, businesses, and government must purchase the economy's expanding output of goods to prevent unplanned increases in inventories. |
|
|
Term
|
Definition
| To reach its full production potential, an economy must achieve economic efficiency as well as full employment. |
|
|
Term
|
Definition
Measured as the real output per hour of work.
Real GDP = Hours of Work x Labor Productivity. |
|
|
Term
| Labor Force Participation Rate |
|
Definition
| The percentage of the working-age population actually in the labor force. |
|
|
Term
|
Definition
| System to assess the relative importance of the supply-side elements that contribute to changes in real GDP, dichotomizing into hours of work and labor productivity. LABOR PRODUCTIVITY INCREASES GDP MORE THAN QUANTITY OF LABOR. |
|
|
Term
|
Definition
| The knowledge and skills that make a worker productive as does investment in formal education and occupational training. |
|
|
Term
|
Definition
| Reductions in per-unit production costs that result from increases in the output levels. |
|
|
Term
|
Definition
| Combination of the computer, fiberoptic cable, wireless technology, and Internet that has been used to connect all parts of the world. |
|
|
Term
|
Definition
| Firms taht advanced various aspects of the new information technology such as Apple, Yahoo, and Google. |
|
|
Term
|
Definition
| Situation in which a given percentage increase in the amount of inputs a firm uses leads to an even larger percentage increase in the amount of output that the firm produces. |
|
|
Term
|
Definition
| Temporary maximum of business activity at which economy is near full employment, real output is close to economic capacity, and prices likely rise. |
|
|
Term
|
Definition
| Period of decline in total output, income, and employment that lasts at least six months and results in contraction of business activity. |
|
|
Term
|
Definition
| Temporary minumum or lowest point in a recession or depression at which employment and output "bottom out" at their lowest rates. |
|
|
Term
|
Definition
| Period in which real GDP, income, and employment rise until economy again nears full capacity. Inflation may occur if spending outpaces production. |
|
|
Term
|
Definition
| Constitutes more than 50% of the total population and consists of people who are able and willing to work, both those who employed and unemployed. |
|
|
Term
|
Definition
The percentage of the labor force that is unemployed. Considers part-time workers and the underemployed as employed, underestimating the true unemployment rate.
Unemployment Rate: Unemployed/Labor Force x 100 |
|
|
Term
|
Definition
| Workers after unsuccessfully seeking employment for a time, become discouraged and drop out of the labor force, again understating the true unemployment rate. |
|
|
Term
|
Definition
| Implies that the labor market does not operate perfectly and instantaneously in matching workers and jobs, resulting in workers that are either searching for their first job or waiting to take jobs in near future. The "unemployment pool" persists, but those in the pool leave and are replaced rather quickly. Frictional employment is only temporary and is actually beneficial as it often represents a move from low-paying to higher-paying jobs. |
|
|
Term
|
Definition
| Results from changes over time in consumer demand that alters the "structure" of the total demand for labor both occupationally and geographically as the composition of the labor force does not immediately respond to new structure of job opportunities. Difficult for structurally unemployed to find jobs without retraining, relocating, or continuing education. |
|
|
Term
|
Definition
| Demand for a particular type of labor shifts from domestic firms to foreign firms. |
|
|
Term
|
Definition
| Caused by a decline in total spending and insufficient demand for goods and services usually concurrent with recession phase of the business cycle. |
|
|
Term
|
Definition
| Less than 100% employment of labor force as economy is only experiencing frictional and structural unemployment, not cyclical. |
|
|
Term
| Natural Rate of Unemployment (NRU) |
|
Definition
| Unemployment rate associated with full employment that is some positive percentage because it accounts for frictional and structural unemployment, which are always present to some degree. |
|
|
Term
|
Definition
| The real GDP that occurs when the economy is "fully employed". |
|
|
Term
|
Definition
| The sacrifice in output that occurs when NRU is not unemployment rate that is the difference between actual GDP and potential GDP. Gap is negative when actual GDP is below potential GDP and gap is positive when actual GDP is above potential GDP, though this does not last for long. The higher the unemployment rate, the larger the GDP gap. |
|
|
Term
|
Definition
| Quantifies relationship between unemployment rate and the GDP gap as for every one percent increase in unemployment beyond NRU, a negative GDP gap of two percent occurs, enabling the calculation of the absolute loss of output associated with above natural unemployment rates. |
|
|
Term
|
Definition
| A rise in the general level of prices that reduces the "purchasing power" of money. |
|
|
Term
| Consumer Price Index (CPI) |
|
Definition
Main measure of inflation that reports the price of a "market basket" of 300 consumer goods purchased by the typical consumer that is used to calculate inflation rate and adjsut government transfer payments to citizens.
CPI = Price of Current Market Basket/ Price Estimate of 1982-84 Basket x 100 |
|
|
Term
|
Definition
| Increases in the price level are caused by an excess of total spending beyond the economy's capacity to produce as increased demand bids price up. |
|
|
Term
|
Definition
| Theory that explains rising prices in terms of factors that raise per-unit production costs as such increases squeeze profits and reduce amount of output each firm is willing to supply at current price, pushing price level upward. |
|
|
Term
| Per-Unit Production Costs |
|
Definition
The average cost of a particular level of output.
PUPC = Total Input Cost/ Units of Output |
|
|
Term
|
Definition
| The underlying increases in the consumer price index after volatile (price-flexible) food and energy prices are removed to avoid being misled by rapid but temporary changes owing to these goods. |
|
|
Term
|
Definition
| The number of dollars received as wages, rent, interest, or profit. |
|
|
Term
|
Definition
Measure of the purchasing power of nominal income adjusted for inflation.
Real Income = Nominal Income/ Price Index (Hundredths) |
|
|
Term
|
Definition
| Causes real income and wealth to be redistributed, harming some and benefitting others. Those hurt by unanticipated inflation are creditors, fixed-income individuals, and savers. Those helped are debtors and flexible-income individuals. |
|
|
Term
| Cost-of-Living Adjustments |
|
Definition
| Automatic raises in pay for union workers to account for increases in consumer price index and prevent erosion of benefits, though adjustments are rarely equal to full inflation rate. |
|
|
Term
|
Definition
| Situations in whcih people see ifnlation coming in advance and are able to lessen the redistribution effects associated with inflation via preparation. |
|
|
Term
|
Definition
| raise in the interest rate on a loan that is equivalent to the anticipated inflatino rate so that the amount paid back will have same purchasing power as the original loan. |
|
|
Term
|
Definition
| The percentage increase in the purchasing power that the borrower pays the lender. |
|
|
Term
|
Definition
The percentage increase in money that the borrower pays the lender, including that resulting from built-in expectation of inflation.
Nominal Interest Rate = Real Interest Rate + Inflation Rate |
|
|
Term
|
Definition
| Extraordinarily rapid inflation that has a devastating impact on real output and unemployment as people respond irrationally to sharp price increases and normal economic relationships are disrupted. |
|
|
