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Econ
Test #3
34
Economics
Graduate
11/16/2008

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Term
Consumer Spending
Definition
Household spending on goods and services
Term
Government Transfers
Definition
payments by the government to individuals for which no good or service is provided in return
Term
Disposable Income
Definition
income plus government transfers minus taxes, is the total amount of household income available to spend on consumption and to save
Term
Investment Spending
Definition
spending on productive physical capital such as machinery and construction of structures
Term
3 steps to the good producing process
Definition
Raw, Intermediate goods and services, final goods and services
Term
Aggregate Spending
Definition
the sum of consumer spending, investment spending,government purchases, and exports minus imports
Term
Value Added
Definition
is the value of its sales minus the value of its purchases
Term
Net Exports
Definition
difference between the value of exports and the value of imports
Term
Most import use of GDP
Definition
Measures size of economy, gives a scale to compare years
Term
Real GDP
Definition
total value of all final goods and services produced in the economy during a given year calculated using the prices of a selected base year.
Term
Nominal GDP
Definition
total value of all final goods and services prodcued in the economy during a given year calculated using the prices current in the year in which the output is produced
Term
inflation rate
Definition
percentage change per year in a price index
Term
CPI
Definition
measures the cost of the market basket of a typical family
Term
producer price index
Definition
measures changes in the prices of goods purchased by producers
Term
GDP deflator
Definition
100x the ratio of nominal GDP to real GDP in that year
Term
inflationary gap
Definition
when aggregate output is above potential output
Term
in the long run the economy is
Definition
self correcting
Term
recessionary gap
Definition
when aggregate output is below potential output
Term
long-run macroeconomic equilibrium
Definition
when the point of short run macroecon equilibrium is on the long-run aggregate supply curve
Term
supply shock
Definition
even that shifts the short-run aggregate supply curve(know examples)
Term
interest rate
Definition
the price calculated as a percentage of the amount borrowed
Term
wealth effect
Definition
change in the aggregate price level is the effect on consumer spending caused by the effect of a change in the aggregate price level.
Term
aggregate demand curve
Definition
shows the relationship between the aggregate price level and the quantity of aggregate output demanded by households
Term
Potential Output
Definition
the level of real GDO the economy would produce if all prices including nominal wages were fully flexible
Term
long-run aggregate supply curve
Definition
relationship between the aggregate price level and the quantity of aggregate output supplied that would exist if all prices were flexible
Term
short run aggregate supply cruve
Definition
relationship shown when everything is fixed
Term
price stability
Definition
aggregate price level is changing slowly
Term
nominal vs real measurement
Definition
nominal: has not been adjusted for changes in price over time.

Real: Has been adjusted
Term
Monetary Policy vs Fiscal Policy and what type of policy
Definition
together they are a stabilization policy

Monetary:changes in money circulated
Fiscal:changes in taxation and government spending
Term
aggregate output
Definition
economies total production of goods and services
Term
Underemployment
Definition
people working at a lesser job then they would work in a good economy
Term
unemployment rate
Definition
percentage of the total number of people in the labor force who are unemployed
Term
Unemployment
Discouraged Workers
Labor Force
Definition
Unemply: people looking but cant find work
Discouraged:people who have given up looking for work
Labor Force:sum of employed and unemployed
Term
Depression vs Recession
Definition
Depression is a very deep and prolonged downturn where are recession is when employment is falling
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