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Macroeconomics -- Chapters 10 & 11
GDP, CPI, and Inflation
16
Economics
Undergraduate 1
07/20/2010

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Term
Microeconomics
Definition
The study of how households and firms make decisions and how they interact in markets.
Term
Macroeconomics
Definition
The study of economy-wide phenomena, including inflation, unemployment, and economic growth.
Term
Gross Domestic Product (GDP)
Definition
The market value of all final goods and services produced within a country in a given period of time.
Term
Consumption
Definition
Spending by households on goods and services, with the exception of purchases of new housing.
Term
Investment
Definition
Spending on capital equipment, inventories, and structures, including household purchases of new housing.
Term
Government Purchases
Definition
Spending on goods and services by local, state, and federal governments.
Term
Net Exports
Definition
Spending on domestically produced goods by foreigners (exports) minus spending on foreign goods by domestic residents (imports).
Term
Nominal GDP
Definition
The production of goods and services valued at current prices.
Term
Real GDP
Definition
The production of goods and services valued at constant prices.
Term
GDP Deflator
Definition
A measure of the price level calculated as the ratio of nominal GDP to real GDP times 100.
Term
Consumer Price Index (CPI)
Definition
A measure of the overall cost of the goods and services bought by a typical consumer.
Term
Inflation Rate
Definition
The percentage change in the price index from the preceding period.
Term
Producer Price Index
Definition
A measure of the cost of a basket of goods and services bought by firms.
Term
Indexation
Definition
The automatic correction by law or contract of a dollar amount for the effects of inflation.
Term
Nominal Interest Rate
Definition
The interest rate as usually reported without a correction of the effects of inflation.
Term
Real Interest Rate
Definition
The interest rate corrected for the effects of inflation.
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