Term
|
Definition
| The knowledge and skills workers acquire from education and training or from their life experiences. |
|
|
Term
| Which of the following is the best measure of the standard of living of the typical person in a country? |
|
Definition
|
|
Term
| The financial system of a country is important for long-run economic growth because |
|
Definition
| firms need the financial system to acquire funds from households. |
|
|
Term
|
Definition
| Bonds, Mutual fund shares, Bank certificates of deposit. |
|
|
Term
| Households supply loanable funds because of the |
|
Definition
| interest income received from the borrowers. |
|
|
Term
| Why do businesses demand loanable funds? |
|
Definition
| Because firms need to borrow funds for new projects. |
|
|
Term
|
Definition
| Governments must borrow funds which causes interest rates to rise and thus private investment is reduced. |
|
|
Term
|
Definition
| When tax revenue exceeds government spending. |
|
|
Term
|
Definition
| When tax revenue equals government spending. |
|
|
Term
|
Definition
| When tax revenue is less than government spending. |
|
|
Term
| Recessions cause the inflation rate to |
|
Definition
|
|
Term
| Recesions cause unemployment rates to |
|
Definition
|
|
Term
| Gross Domestic Product (GDP) |
|
Definition
| Market value of all final goods and services produced in a country during a specific time period. |
|
|
Term
|
Definition
| is measured using market values, not quantities; includes only final goods and services; and includes only current production. |
|
|
Term
|
Definition
1. Consumption
2. Investment
3. Government Purchases
4. Net Exports |
|
|
Term
|
Definition
|
|
Term
|
Definition
| Value of final goods and services expressed in current-year prices. |
|
|
Term
|
Definition
| Value of final goods and services expressed at base-year prices. Also adjusts for the effects of inflation. |
|
|
Term
|
Definition
| The percentage of the labor force that is unemployed. |
|
|
Term
| Unemployment Rate Formula |
|
Definition
| Number of Unemployed / Labor Force X's 100 |
|
|
Term
| Labor Force Participation Rate (LFPR) |
|
Definition
| Percentage of the working-age population in the labor force. |
|
|
Term
| Labor Force Participation Rate Formula (LFPR) |
|
Definition
| Labor Force / Working Age Population X's 100 |
|
|
Term
| Employment-Population Ratio |
|
Definition
| The percentage of the working age population that is employed. |
|
|
Term
| Employment-Population Ratio Formula |
|
Definition
| Number of Unemployed / Working Age Population X's 100 |
|
|
Term
|
Definition
| Short-term unemployment that arises from the process of matching workers with jobs. |
|
|
Term
|
Definition
| Unemployment arising from a persistent mismatch between the skills and characteristics of workers and the requirements of jobs. |
|
|
Term
|
Definition
| Unemployment caused by a business cycle recession. |
|
|
Term
| Natural Rate of Unemployment |
|
Definition
| The normal rate of unemployment, consisting of frictional and structural unemployment. |
|
|
Term
| Factors that Affect Unemployment |
|
Definition
Unemployment Benefits
Minimum Wages
Powerful Unions
Efficiency Wages
Employment Protection Laws |
|
|
Term
|
Definition
| A measure of the average prices of goods and services in the economy. |
|
|
Term
|
Definition
| The percentage increase in the price level from one year to the next. |
|
|
Term
|
Definition
| A measure of the price level, calculated by dividing nominal GDP by real GDP and multiplying by 100. |
|
|
Term
|
Definition
| An average of the prices of the goods and services purchased by the typical urban family of four. |
|
|
Term
| Consumer Price Index Formula |
|
Definition
| Expenditure in Current Year / Expenditure in Base Year X's 100 |
|
|
Term
|
Definition
| An average of the prices received by producers of goods and services at all stages of the production process. |
|
|
Term
|
Definition
| The stated interest rate on a loan. |
|
|
Term
|
Definition
| The nominal interest rate minus the inflation rate. |
|
|
Term
|
Definition
1. High and variable inflation reduces investment.
2. Inflation distorts the information delivered by prices.
3. High and variable inflation results in less productive use of resources. |
|
|
Term
|
Definition
| The process by which rising productivity increases the average standard of living. |
|
|
Term
|
Definition
| If a variable grows at a rate of x percent per year, 70/x will approximate the number of years required for the variable to double. |
|
|
Term
|
Definition
| The quantity of goods and services that can be produced by one worker or by one hour of work. |
|
|
Term
| Labor productivity is determined by: |
|
Definition
1. Increases in capital per hour worked.
2. Technological change. |
|
|
Term
| Sources of Economic Growth |
|
Definition
1. Gains from Trade
2. Entrepreneurial Discovery
3. Investment |
|
|
Term
| Institutions & Policies That Promote Growth |
|
Definition
1. Legal System: Secure property rights and rule of law
2. Competitive markets
3. Stable money and prices
4. Minimal regulation
5. Avoidance of high tax rates
6. Trade openness |
|
|
Term
|
Definition
| The level of GDP attained when all firms are producing at capacity. |
|
|
Term
|
Definition
| The system of financial markets and financial intermediaries through which firms acquire funds from households. |
|
|
Term
|
Definition
| markets where financial securities (stock, bonds, etc.) are bought & sold. |
|
|
Term
|
Definition
| firms (banks, mutual funds, pension funds, insurance companies, etc.) that borrow funds from savers and lend the funds to borrowers |
|
|
Term
| Financial System Functions |
|
Definition
1. Risk sharing
2. Liquidity
3. Information |
|
|
Term
| Market for Loanable Funds |
|
Definition
| The interaction of borrowers and lenders that determines the market interest rate and the quantity of loanable funds exchanged. |
|
|
Term
|
Definition
| A decline in private expenditures as a result of an increase in government purchases. |
|
|
Term
|
Definition
| Alternating periods of expanding and contractions economic activity. |
|
|
