Term
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Definition
| The value of the entire output produced annually within a country's borders, adjusted for price changes |
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Term
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Definition
| Changes in government expenditures and/or changes in taxes to achieve particular macroeconomic goals |
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Term
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Definition
| Changes in the money supply, or the rate of growth of the money supply, to achieve particular macroeconomic goals |
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Term
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Definition
| A weighted average of the prices of all goods and services |
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Term
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Definition
| A measure of the price level |
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Term
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Definition
| CPI; A widely cited index number for the price level; the weighted average of prices of a specific set of goods and services purchased by a typical household |
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Term
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Definition
| The year chosen as a point of reference or basis of comparison for prices in other years; a benchmark year |
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Term
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Definition
| An increase in the price level |
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Term
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Definition
| Nominal income adjusted for price changes |
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Term
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Definition
| The current-dollar amount of a person's income |
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Term
| The formula for real income? |
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Definition
| Real income = (Nominal Income/CPI) x 100 |
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Term
| Not keeping up with inflation in terms of real income? |
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Definition
| Real income year 1 =/= Real income year 2 |
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Term
| Keeping up with inflation in terms of real income? |
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Definition
| Real income year 2 = Real income year 1 |
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Term
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Definition
| PI does not reflect substitutions |
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Term
| GDP Implicit Price Deflator |
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Definition
| based on all goods and services produced in an economy |
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Term
| Salary in today's current dollars formula? |
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Definition
| Salary[earlier year] x (CPI[current year]/CPI[earlier year]) |
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Term
| Civilian labor force formula? |
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Definition
| Employed Persons + Unemployed persons |
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Term
| What is an unemployed person consist of? |
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Definition
| Not having a job, looking for work, available for work; not working but waiting to be called back to a job from which they were temporarily laid off |
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Term
| Unemployment rate (U) formula? |
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Definition
| Number of employed persons/Civilian labor force |
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Term
| Employment rate (E) formula? |
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Definition
| Number of employed persons/Civilian noninstitutional population |
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Term
| Labor force participation rate (LFPR) formula? |
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Definition
| Civilian labor force/Civilian noninstitutional population |
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Term
| Four types of unemployment? |
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Definition
| Frictional, structural, natural, cyclical |
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Term
| Cyclical unemployment rate (U[c]) formula? |
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Definition
| Unemployment rate (U) - Natural unemployment rate (U[n]) |
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Term
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Definition
| The condition that exists when the unemployment rate is equal to the natural unemployment rate |
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Term
| Cyclical Unemployment Rate |
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Definition
| The difference between the employment rate and the natural unemployment rate |
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Term
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Definition
| Gross Domestic Product; The total market value of all final goods and services produced annually within a country's borders |
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Term
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Definition
| A good in the hands of its final user |
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Term
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Definition
| A good that is an input in the production of a final good |
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Term
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Definition
| Counting a good more than once when computing GDP |
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Term
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Definition
| The dollar value contributed to a final good at each stage of production |
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Term
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Definition
| A payment to a person that is not made in return for goods and services currently supplied |
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Term
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Definition
| Country's GDP/Population of Country |
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Term
| GDP overstates our overall what? |
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Definition
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Term
| The four sectors in our economy? |
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Definition
| Household, Business, Government, Foreign |
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Term
| The four expenditures of each sector? |
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Definition
| Consumption, Gross private domestic investment, Gov't consumption expenditures & gross investment, net exports |
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Term
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Definition
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Term
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Definition
| The usm of all purchases of newly produced capital goods, changes in business inventories, and purchases of new residential housing |
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Term
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Definition
| Changes in the stock of unsold goods |
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Term
| Formula for computing GDP using the expenditure approach? |
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Definition
| GDP = Consumption + Investments + Government Purchases + (Exports - Imports); C + I[n] + G + NX |
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Term
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Definition
| Federal, state, and local government purchases of goods and services and gross investment in highways, bridges, and so on. |
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Term
| Government Transfer Payments |
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Definition
| Payments to persons that are not made in return for goods and services currently supplied |
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Term
| National income is the sum of what five components? |
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Definition
| Compensation of employees, proprietors' income, corporate profits, rental income of persons, and net interest |
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Term
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Definition
| Compensation of employees + proprietors' income + corporate profits + rental income + net interest |
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Term
| GDP formula in terms of national income? |
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Definition
| National Income - Income earned from the rest of the world + Income earned by the rest of the world + Indirect business taxes + Capital consumption allowance + Statistic discrepancy |
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Term
| Net domestic product (NDP) formula? |
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Definition
| GDP - capital consumption allowance |
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Term
| Capital Consumption Allowance |
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Definition
| Depreciation; the estimated amount of capital goods used up in production through natural wear, obsolescence, and accidental destruction |
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Term
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Definition
| National Income - Undistributed corporate profits - social insurance taxes - Corporate profits taxes + Transfer payments |
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Term
| Disposable income formula? |
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Definition
| Personal income - Personal Taxes |
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Term
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Definition
| The portion of personal income that can be used for consumption or savings |
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Term
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Definition
| The amount of income that individuals actually receive |
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Term
| Net Domestic Product (NDP) |
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Definition
| measures the total value of new goods available in the economy in a given year after worn-out capital goods have been replaced |
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Term
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Definition
| The value of the entire output produced annually within a country's borders, adjusted for price changes |
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Term
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Definition
| Real GDP = Base-year Prices x Current-year quantities |
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Term
| What is the Real GDP if the Price of Good X in Year 1 is $10 and the Quantity of Produced of Good X (units) is 120 in Year 2? |
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Definition
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Term
| Economic growth is measured in terms of? |
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Definition
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Term
| Business Cycle & all 5 phases? |
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Definition
| Recurrent swings (up and down) in Real GDP: Peak, Contraction, Trough, Recovery, & Expansion |
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Term
| Percentage change in Real GDP formula? |
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Definition
| ({Real GDP[later year] - Real GDP[earlier year}/Real GDP[earlier year]) x 100 |
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Term
| What is the peak of a business cycle? The trough? |
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Definition
Peak ~ Real GDP's temporary high
Trough ~ Real GDP's temporary low |
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Term
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Definition
| Economic declince lasting more than a few months |
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Term
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Definition
| The quantity demanded of all goods & services (Real GDP) at different price levels, ceteris paribus |
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Term
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Definition
| The quantity of goods and services that can be purchased with a unit of money. Purchasing power & price level are INVERSELY related |
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Term
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Definition
| Value of a person's monetary assets |
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Term
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Definition
| The change in the purchasing power of dollar-denominated assets that results from a change in the price level |
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Term
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Definition
| The changes in household and business buying as the interest rate changes |
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Term
| International Trade Effect |
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Definition
| The change in foreign sector spending as the price level changes |
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Term
| An important point to remember on the three different kinds of effects on Aggregate Demand? |
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Definition
| the Interest Rate can change DUE TO things OTHER THAN the price level changing, and not EVERYTHING that changes the interest rate leads to a movement from one point to another point on the AD curve |
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Term
| Total expenditures on U.S. goods & services formula? |
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Definition
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Term
| How is a change brought about in Real GDP? |
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Definition
| A change in the quantity demanded of Real GDP is brought about by a change in the price level. |
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Term
| What can change aggregate demand? |
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Definition
| A change in spending within U.S. goods & services |
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Term
| What kind of relationship does spending have with aggregate demand? |
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Definition
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Term
| What factors can change consumption with total expenditures? |
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Definition
| Wealth, Expectations about future prices & income, Interest rate, and income taxes |
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Term
| What factors can change investment with total expenditures? |
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Definition
| Interest rate, expectations about future sales, business taxes |
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Term
| What factors can change net exports with total expenditures? |
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Definition
| Foreign real national income & exchange rate (price of one currency in terms of another) |
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Term
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Definition
| An increase in the value of one currency relative to other currencies |
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Term
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Definition
| A decrease in the value of one currency relative to other currencies |
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Term
| How does a change in money supply change aggregate demand? |
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Definition
| It affects interest rates, in turn affects consumption & investment, then those two change aggregate demand |
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Term
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Definition
| The quantity supplied of all goods & services (Real GDP) at different price levels |
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Term
| Short-Run Aggregate Supply Curve |
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Definition
| SRAS; A curve that shows the quantity supplied of all goods and services (Real GDP) at different price levels |
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Term
| Why is the SRAS curve upward sloping? |
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Definition
Sticky wages ~ inflexible wages
Worker misperceptions ~ misperceive real wage changes within the employees |
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Term
| What is the relationship between real wages & quantity supplied of labor? Real wage & quantity demanded of labor? |
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Definition
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Term
| What shifts the SRAS curve? |
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Definition
| Wage rates, prices of nonlabor inputs, productivity, & supply shocks |
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Term
| What is an adverse supply shock? Beneficial supply shock? |
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Definition
Adverse ~ shifts the SRAS curve left; bad weather means less farming
Beneficial ~ shifts the SRAS curve right; major oil discovery |
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Term
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Definition
| The condition that exists in the economy when the quantity demanded of Real GDP equals the quantity supplied of Real GDP (short-run) |
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Term
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Definition
| The Real GDP that is produced at the natural unemployment rate |
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Term
| Long-Run Aggregate Supply Curve |
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Definition
| (LRAS) Curve; The LRAS curve is a vertical line at the level of Natural Real GDP |
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Term
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Definition
| The condition that exists in the economy when wages & prices have adjusted to their final equilibrium levels & workers do not have any relevant misperceptions |
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Term
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Definition
| Supply creates its own demand |
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Term
| The classical view of economics? |
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Definition
| Viewpoint on economics within the 1750s & 1800s; some ideas are still employed by modern economists |
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Term
| Classical Economists & prices and wages? |
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Definition
| Believed that most markets are competitive; supply and demand operate in all markets |
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Term
| The three states of the economy in terms of Real GDP & Natural Real GDP? |
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Definition
| Real GDP < Natural Real GDP, Recession; Real GDP = Natural Real GDP, Equilibrium; Real GDP > Natural Real GDP, Inflation |
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Term
| Three states of the labor market? |
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Definition
| Equilibrium, Shortage, Surplus |
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Term
| Employment rates & Unemployment markets within the state of the labor market? |
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Definition
| Unmployment rate > Natural unmployment rate when Real GDP < Natural Real GDP, Surplus; Unemployment Rate < natural unemployment rate when Real GDP > Natural Real GDP, shortage |
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Term
| What happens if the economy is in a recessionary gap? |
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Definition
| Producing Real GDP < Natural Real GDP, unemployment rate > natural unemployment rate, surplus exists |
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Term
| What happens if the economy is in an inflationary gap? |
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Definition
| Producing Real GDP > Natural Real GDP, unemployment rate < natural unemployment rate, shortage exists |
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Term
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Definition
| A public policy of not interfering with market activities in the economy |
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Term
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Definition
| In the short run: P increases, Q increases. Long run: P increases, Q does not change |
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Term
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Definition
| In the short run: P decreases, Q decreases. Long run: P decreases, Q does not change |
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