Term
Real GDP (Gross Domestic Product, Q)
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formula |
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Definition
The value of the intire output produced annually within a country's borders, adjusted for price changes.It is in GDP in base-year dollars.
approximately (Base-year prices x Current-year prices)
or
nominal GDP
price index (hundredths) |
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Term
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Definition
| Changes in the 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
| fixed-weighted price index |
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Definition
| any price index that uses fixed quantities of goods, and therefore does not reflect the fact that people might subsititute one good for another as the price of one good rises relative to another. The substitution bias in a weighted price index can overstate the cost of living. |
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Term
dollar amount formula (earlier)
convertind dollars from one year to another |
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Definition
| salary in current dollars= salary(BY) x CPI(CY)/CPI(BY) |
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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 measurement of the price level
nomGDP/realGDP |
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Term
Consumer Price Index (CPI)
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Definition
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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total dollar expenditure on market basket in CY x 100
total dollar expenditure on market basket in BY |
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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
| problems, theories, policis, and different view on how the economy works. |
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Term
P-Q Category
topics relation to P or Q |
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Definition
GDP. P times Q
Unemployment. Changes in Q
Inflation. A rising P
Deflation. A fallin in P
Economic growth. Related to increasing Q
Stagflation. A rising P combined with rising unemployment.
Business cycle. Recurrent swings up and down in Q
Inflationary gap. The condition of the economy when Q is above its natural level.
Recessionary gap. The condition of the economy when Q is below its natural level.
Fiscal policy.
Monetary policy. |
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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.
Nominal Income x 100
CPI |
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Term
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Definition
| The current-dollar amount of a person's income. |
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Term
Unemployment Rate
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formula |
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Definition
The percentage of the civilian force that is unemployed: Unemployment rate = Number of unemplyed persons/Civilian labor force.
U= Number of unemployed persons |
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Term
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Definition
| The percentage of the civilian noninstituational population that is employed: Employment rate= Number of employed persons/Civilian noninstitutional poplation. |
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Term
| Labor Force Participation Rate |
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Definition
The percentage of the civilian non-institutional population that is in the civilian labor force.
Labor force pariticpation rate = Civilian labor force/Civilian noninstituational population |
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Term
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Definition
| Unemployment due to the natural "friction" of the economy, which is caused by changing market confitions and is represented by qualified individuals with transferable skills who change jobs |
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Term
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Definition
| Unemployment due to structural changes in the economy that eliminate some jobs and create other jobs for which the unemployed are unqualified. |
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Term
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Definition
| Unemployment caused by frictional and structural factors in the economy. Natural unemployment rate = Frictional unemployment rate + Structural unemployment rate. |
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Term
| Cyclical Unemployment Rate |
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Definition
| The difference between the unemployment rate and the natural unemployment rate. |
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Term
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Definition
| The conditionat that exists when the unemployment rate is equal to the natural unemployment rate. |
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Term
| Gross Domestic Product (GDP) |
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Definition
| The total market value of all final goods and servies produced annually withini 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
| The sum of spending on durable good, nondurable goods, and services. Largest spending component of GDP |
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Term
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Definition
The sum of all purchases of newly produced capitaal goods, changes in business invetories, and purchases of new residential housing.
Fixed invest. + Inventory invest. |
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Term
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Definition
| Changes in the stock of unsold goods. |
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Term
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Definition
| Business purchases of capital goods, such as machinery and factories, and purchases of new residential housing. (larger of the two) |
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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
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Definition
| Total domestic (U.S.) spending on foreign goods. |
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Term
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Definition
| Total foreign spending on domestic (U.S.) goods. |
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Term
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Definition
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Term
| GDP using Expenditure approach |
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Definition
GDP equals consumption (C) plus investment (I) plus government purchases (G) plus net exports (EX-IM)
GDP = C + I + G + (EX-IM) |
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Term
| GDP using Income approach |
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Definition
| GDP = National Income - Income earned from the rest of the world + Income earned by the rest of the world + Indirect business taxes + Capital consumption allowance + Statistical discrepancy. |
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Term
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Definition
| Total income earned by the U.S. citizens and businesses, no matter where they reside or are located. National income is the sum of the payments to resources (land, labor, capital, and entrepreneurship). National income = Compensation of employees + Proprietors' income + Corporate profits + Rental income of persons + Net interest. |
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Term
| Capital Consumption Allowance (Depreciation) |
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Definition
| The estimated amount of capital goods used up in production through natural wear, obsolescence, and accidental destruction. |
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Term
| Net Domestic Product (NDP) |
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Definition
| GDP minus the capital consumption allowance. |
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Term
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Definition
| The amount of income that individuals actually receive. = national income - undistributed corporate profits - social insurance taxes - corporate profits taxes (- corporate income taxes) + transfer payments. |
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Term
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Definition
The portion of personal income that can be used for consumption or saving.
= personal income - personal taxes (especially income taxes) |
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Term
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Definition
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Term
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Definition
Recurrent swings (up&down) in Real GDP.
peak, contraction, trough, recovery, expansion
peak to peak |
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Term
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Definition
| representative group of good sand services for CPI |
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Term
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Definition
| The quantity demanded of all goods and services (Real GDP) at different price levels, ceteris paribus |
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Term
| Aggregate Demand (AD) Curve |
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Definition
| A curve that shows the quantity demanded of all goods and services (real GDP) at different price levels, ceteris paribus |
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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 value of a person's monetary assets. Wealth, as distinguished from monetary wealth, refers to the value of all assets owned, both monetary and nonmonetary. In short, a person's wealth equals his or her monetary wealth (e.g. $1000 cash) plus nonmonetary wealth (eg. car or house) |
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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 and the price level are inversely related: As the price level goes up (down), purchasing power goes down (up) |
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Term
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Definition
| The changes in household and business buying as the interest rate changes(which, in turn, is a reflection of change in the demand or supply of credit brought on by price level 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
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Definition
| The value fo all assets owned, both monetary and nonmonetary. |
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Term
| How Spending Components Affect Aggregate Demand |
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Definition
C^(v)I^(v)G^(v)NX^(v) = AD^(v)
rise (shift ro right) fall (left)
Wealth ^(v) = C^(v) = AD^(v)
Expect higher future prices = C^ = AD^
Expect lower future prices = Cv = ADv
Expect higher futurw income = C^ = AD^
Expect lower future income = Cv = ADv
Interest Rate ^(v) = Cv(^) = ADv(^)
Income Taxes ^(v) = Cv(^) = ADv(^)
Interest Rate ^(v) = Iv(^) = ADv(^)
Businesses become optomistic(pessimistic) about future sales = I^(v) = AD^(v)
Business Taxes ^(v) = Iv(^) ADv(^)
Foreign real national income ^(v) = US exports ^(v) = US net exports ^(v) = AD ^(v)
Dollar depreciates(apprectiates) US exports ^(v) & US imports V(^) = US net exports ^(v) = AD ^(v) |
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Term
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Definition
| The quantity supplied of all goods and services (Real GDP) at different price levels, ceretis paribus |
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Term
| Short-Run Aggregate Supply (SRAS) Curve |
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Definition
| A cruve that shows the quantity supplied of goods and servies (Real GDP) at different price levels, ceretis paribus |
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Term
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Definition
| Profit per unit = Price per unit - Cost per unit |
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Term
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Definition
major natural or institutional changes on the supply side of the economy that affect the AS
adverse < beneficial > |
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Term
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Definition
| the output producer per unit of input employed over some period of time |
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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 (short-run) quantity supplied of Real GDP. This condition is met where the aggregate demand curve intersects the short-run aggregate supply curve.
AD^ = P^ Q^
SRAS^(v) = Pv(^) Q^(v) |
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Term
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Definition
| The Real GDP that is produced at the natural unemployment rate. The Real GDP that is produced when the economy is in long-run equilibrium. |
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Term
| Long-Run Aggregate Supply (LRAS) Curve |
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Definition
| The LRAS curve is a vertical line at the level of Natural Real GDP. It represents the output the economy produces when wages and prices have adjusted to their (final) equilibrium levels and neither producers nor workers have any relevant misperceptions. |
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Term
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Definition
| The condition that exists in the economy when wages and prices have adjusted to their (final) equilibrium levels and workers do not have any relevant miperceptions. Graphically, long-run equilibrium occurs at the intersection of the AD and LRAS curves. |
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Term
| Real Balance, Interest Rate, & International Trade Effects (price level change) |
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Definition
RB - Price level v(^) = Purchasing Power ^(v) = Monetary Wealth ^(v) = buy more(fewer) goods
IR - Price level v(^) = Purchasing Power ^(v) = less money needed(borrow money) to buy fixed bundle of goods = save more(demand for credit ^) = interest rate v(^) = businesses and households borrow more(less) at lower(higher) interest rate = buy more(fewer) goods
IT - Price level in US v(^) relative to foreign price levels = U.S. goods relatively less(more) expensive than foreign goods = both Americans and foreigners buy more(fewer) U.S. goods |
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Term
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Definition
| unexpected changes in the demand for goods and services |
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Term
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Definition
| a store of output that has been produced but not yet sold. |
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Term
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Definition
| quantities demanded equal quantities supplied |
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Term
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Definition
| current consumption is less than current output (or when spending is less than income) |
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Term
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Definition
| product prices that remain in place (at least for a while) even though supply or demand has changed; stuck prices or sticky prices. only way to fix is to change output levels. = DI - C |
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Term
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Definition
| product prices that freely move upward or downward when product demand or supply changes |
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Term
| net private domestic investment |
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Definition
| only investment in the form of added capital |
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Term
| GDP, NDP, NI, PI, DI relationships |
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Definition
| GDP - Depreciation = NI - Statistical discrepancy + Net foreign factor income = NI - taxes(EX/IM & corp. income)- SS - corp. profits + transfer payments = PI - personal taxes = DI |
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Term
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Definition
| the historically recent phenomenon in which nations for the first time have experienced sustained increases in real GDP per capita (realGDP/population) |
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Term
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Definition
| as it relates to economic growth, countries that develop and use advanced technologies, which then become available for follower countries |
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Term
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Definition
| as it relates to economic growth, countries that adopt advanced technologies that previously were developed and used by leader countries |
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Term
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Definition
| an increase in the availability of a resource, an improvement in its quality, or an expansion of technological knowledge that makes it possible for an economy to produce a greater output of goods and services. |
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Term
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Definition
| the increase in the level of aggregate demand that brings about the economic growth made possible by an increase in the production potential of the economy |
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Term
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Definition
| the capacity of an economy to combine resources effectively to achieve growth of real output that the supply factors (of growth) make possible |
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Term
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Definition
| total output divided by the quantity of labor employed to produce it; the average product of labor or output per hour of work |
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Term
| labor-force participation rate |
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Definition
| the percentage of the workingage population that is actually in the labor force |
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Term
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Definition
| the bookkeeping of the supply-side elements such as productivity and labor inputs that contribute to changes in real GDP over some specific time period |
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Term
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Definition
| the capital goods usually provided by the public sector for the use of its citizens and firms (for example, highways, bridges, transit systems, wastewater treament facilities, municipal water systems, and airports). |
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Term
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Definition
| the knowledge and skills that make a person productive |
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Term
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Definition
| reductions in the average total cost of producing a product as the firm expands the size of plant(its output) in the long run; the economies of mass production |
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Term
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Definition
| new and more efficient methods of delivering and receiving information through use of computers, fax machines, wireless phones, adn the internet |
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Term
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Definition
| a new firm focused on creating and introducing a particular new product or employing a specific new production of distribution method |
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Term
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Definition
| an increase in a firm's output by a larger percentage than the percentage increase in its inputs |
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Term
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Definition
| increase in the value of a product to each user, including existing users, as the total number of users rises |
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Term
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Definition
| achieving greater productivity and lower average total cost through gains in knowledfe and skill that accompany repetition of a task; a source of economies of scale |
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Term
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Definition
| employees who have left the labor force because they have not been able to find employment |
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Term
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Definition
| the real output (GDP) an economy can produce when it fully employs its available resources |
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Term
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Definition
| actual GDP minues potential output; may be either a positive amount (+GDPgap) or a negative amount -GDPgap |
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Term
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Definition
| the generalization that any 1-percentage-point rise in the umemployment rate above the full-employment unemployment rate is associated with a rise in the negative GDP gap by 2 percent of potential output (potential GDP) |
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Term
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Definition
| increases in the price level (inflation) resulting from an excess of demand over output at the existing price level, caused by an increase in aggregate demand |
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Term
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Definition
| increases in the price level (inflation) resulting from an increase in resource costs(eg. raw material prices) and hence in per-unit production costs; inflation caused by reductions in aggregate supply |
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Term
| per-unit production costs |
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Definition
| the average production cost of a particular level of output; total input cost divided by units of output |
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Term
| unanticipated/anticipated inflation |
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Definition
| increases in the price level (inflation) at a rate greater than expected/ occur at the expected rate |
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Term
| cost-of-living adjustments (COLAs) |
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Definition
| an automatic increase in the incomes (wages) of workers when inflation occurs; guaranteed by a collective bargaining contract between firms and workers. |
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Term
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Definition
| the interest rate expressed in dollars of constant value(forinflation) and equal to the nominal interest rate less the expected rate of inflations |
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Term
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Definition
| interest rate expressed in terms of annual ammounts currently charged for interest and not adjusted for inflations |
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Term
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Definition
| a decline in the economy's price level |
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Term
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Definition
| a very rapid rise in the price level, an extremely high rate of inflation |
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Term
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Definition
| curve or schedule that shows the amounts firms plan to invest at various possible values of real GDP |
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Term
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Definition
| the gross domestic product at which the total quantity of final goods and servise purchased (AE) is equal to the total quantity of final goods and servives produced (RDO); the RDO at which the AD curve intersects the ASC |
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Term
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Definition
| addition of spending to the income-expenditure stream: investment, government purchases, adn net exports |
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Term
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Definition
| a withdrawawl of potential spending from the income-expenditures stream via saving, tax payments, or imports; a withdrawal that reduces the lending potential of the banking system |
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Term
| recessionary&inflationary expenditure gap |
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Definition
| the amount by which the AES must shift upward(downward) to increase(decrease) the real (nominal) GDP to its full-employment, noninflationary level |
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Term
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Definition
| tax that is constant amount(the tax revenue of the government is the same) at all levels of GDP |
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Term
| unplanned changes in inventory |
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Definition
| because of unexpected increases or decreases of aggregate spending(or of AE) |
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Term
| aggregate expenditures schedule |
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Definition
| curve showing total amount spent for final goods and services at different levels of real GDP |
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Term
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Definition
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Term
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Definition
| a schedule showing the amounts households plant o spend for consumer goods at different levels of DI |
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Term
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Definition
| a schedule that shows the amounts households plant o save (plan not to spend for consumer goods), at different levels of disposable income |
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Term
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Definition
| level of DI at which households plan to consume all their income and to save none of it |
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Term
| average propensity to consume (APC) |
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Definition
| fraction or % of disposable income that households plan to spend for consumer goods and services. consumption/DI |
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Term
| average propensity to save (APS) |
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Definition
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Term
| marginal propensity to consume (MPC) |
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Definition
| the fraction of any change in disposible income spent for consumer goods; = change in consumption/change in DI |
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Term
| marginal propensity to save (MPS) |
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Definition
| the fraction of any change in disposible income that households save; = change in saving/change in DI |
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Term
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Definition
| the tendency for people to increase their consumtion spending when the value of their financial a nd real assets rises and to decrease their consumption spending when the value of those assets falls |
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Term
| expected rate of return (R&D activity) |
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Definition
| increase in profit a firm nticipates it will obtain by purchasing capital; expressed as a % of the total cost of the investment (or R&D) activity |
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Term
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Definition
| a curve that shows the amounts firms plan to invest at various possible values of real GDP |
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Term
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Definition
| ratio of a change in the equilibrium GDp to the change in investment or in any other component of AE or AD; the number by which a change in any such component must be multiplied to find the resulting change int eh equilibrium GDP |
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