Term
|
Definition
Focus on behaviors, motives of the individual decision makers (in markets), and the interaction between them
Ex. One who studies pricing policies at GMC |
|
|
Term
|
Definition
Focus on the behavior and performance of the overall economy
Ex. One who studies the inflation rates of Monte Carlo |
|
|
Term
| Gross domestic product (GDP) |
|
Definition
A statistic used to describe the economic conditions of a market.
Measures 2 things at the same time:
1. total income
2. total expenditures
(Aggregate demand)
The total income must match the total expenditures. Measures: wages and salaries, profits, interest earnings, and rent. |
|
|
Term
GDP is the market value of all final goods and services produced within a
country during a given period of time |
|
Definition
- GDP market value
- Market value = All market prices x quantity
- Of all
- All goods and services sold legally in an organized market
- Final
- Does not include intermediate goods
- Includes a can of soda, but not the aluminium of the can
- Goods and services
- Produced
- Current goods and services in a period
- Does not include used goods
- Within a country
- If it is manufactured in the U.S. then it is apart of the U.S. GDP
- In a given period of time
- Usually reported every 3 months (quarter)
- The government reports annually
|
|
|
Term
| Expendature components of GDP |
|
Definition
- Consumer expenditures (C)
- Households spending on final goods, excluding housing
- Ex. (non)durable goods, services
- Investment expenditures (I)
- Spending on new equipment and structures by firms, includes housing
- Ex. Physical assets, inventory balances, and housing
- Government expenditures (G)
- Spending on final goods on a local, state, and federal level
- Does not include transerfers- social security, unimpoyment benefits
- Net exports (NX=X-M)
- How much we sell to foreign buyers minus how much we buy from foreign sellers
- GDP= C+I+G+(X-M)
|
|
|
Term
|
Definition
| GDP calculated by current prices. May be misleading if inflation or deflation occurs. |
|
|
Term
|
Definition
| GDP calculated with real dollars (constant spending power) that have constant or base-year price. Accurate because it is unaffected by inflation or deflation. |
|
|
Term
|
Definition
| Expresses the cost of goods and services in a given period related to the cost in a base period. Used to detect inflation, deflation, or price stability. |
|
|
Term
|
Definition
| Measures changes in overall prices (cost of living) in an economy. GDP deflator = (nominal GDP/real GDP) x100. If = 180 then the cost of living has gone up 80%. |
|
|
Term
|
Definition
| Reflects income of the average person in the economy therefore a measure of economic well-being. GDP per capita = nominal or real GDP/population. Not accurate, does not include: value of leisure, production at home, effects of earnings (environmental), or distribution. Does not measure well-fare but rather economic activity. |
|
|
Term
|
Definition
| Every person in the labor force is employed |
|
|
Term
|
Definition
| Ratio of people unemployed to the labor force |
|
|
Term
|
Definition
Post WWII british socialists who wanted to replace the “scramble for private gain” with “collective welfare." Wanted to move from Capitalism towards Socialism.
and “socialism”. Includes Beatrice Webb, Sidney Webb, and Bernard Shaw. |
|
|
Term
|
Definition
| An economic system in which the state assumes responsibility of the welfare of its citizens, includes: education, employment, health care, and social security. Not meant to convert economic system. |
|
|
Term
|
Definition
| The government converts a private company into a public company. Focus on "commanding heights" a term Lenin coined that refers to the key strategic industries of a government. Ex. the nationalization of British coal. |
|
|
Term
|
Definition
| A program worked out beforehand by the government to achieve economic objectives. For the whole economy. Historically a poor plan that has led to failure. Replaces the free market. |
|
|
Term
| French indicative planning |
|
Definition
| Focuses and prioritizes pointing towards the private sector. More of a guide than a plan. Ex. If the French realize that biotechnology is the future, they will attract private and public sectors. |
|
|
Term
| German social market economy |
|
Definition
| Reliance on a free market economy backed up with social welfare state. US wanted Germany to follow Great Britain, but decided otherwise. |
|
|
Term
|
Definition
| Money (an efficient medium of exchange)is defined by a specific weight of gold. Must have enough money to back the gold. In 1944 the Bretton Woods conference permitted only foreign central banks to convert dollars they acquired into gold, at $35 per ounce. Today is the US dollar is a fiat (government decreed) currency since 1972. There is nothing backing up the US dollar but confidence and belief. |
|
|
Term
|
Definition
| The government fixes or pegs the value of a national currency to a commodity such as gold or another currency such as the US dollar. US currency is not a fixed rate currency, it is a free flowing currency meaning its value fluctuates. |
|
|
Term
|
Definition
A market structure in which there is a
single seller. The firm is called a monopolist. Ex: De Beers of South Africa |
|
|
Term
|
Definition
Post WWII German liberals who developed laissez-faire economic policies with a strong social net (Social Market Economy). Includes Konrad Adenauer and Ludwig Erhard. However, the German government owned stock in 650 German
companies, but today is moving towards Capitalism. |
|
|
Term
|
Definition
Wrote "Managed Capitalism." Focused on macroeconomics. Came up with concepts like: national income accounting, gross domestic product (GDP), aggregate demand, and fiscal policy.Concluded that the free-markets were subject to change and supply and demand did not always result in full-employment. Reason: Inadequate Savings and
Investments.
Solution: Replace the missing private
investments with public investments.
Why expect anything from the government? Capitalism and socialism are not perfect, when there are flaws the government can intervene to prevent equilibrium situation, such as too much unemployment, and use the government’s fiscal/monetary policies to help come out of market failures. Keynes did not talk about chronic market failures, only mentioned in the short run, in good times run surpluses and in bad times run deficits to stimulate the economy. Called the savior of modern Capitalism. |
|
|
Term
|
Definition
The government plan to steer the economy in some desired direction using taxation and/or spending policies. Can stimulate or slow down the economy or aggregate demand. Slowing down economic progress is necessary.
A deficit occurs if the government
spends more than its tax revenues (gov. is trying to contract economic growth) and a surplus occurs if the government spends less than its tax revenues (gov. wants to expand econ. growth). Nobody is in charge of the whole government control on the economy, mainly the treasury but also the congress and other entities. |
|
|
Term
| GATT Agreement and Free Trade |
|
Definition
GATT- General Agreement on Tariffs
and Trade. A tariff is a tax on goods produced abroad and sold domestically.
Tariffs are trade restrictions. Tariffs raise the price of imported goods above the world price by the amount of the tariff. |
|
|
Term
|
Definition
- Natural unemployment
- Frictional unemployment
- When you are in the job market looking for a job.
- A good thing because it creates compititon and helps to find the right person for the right job
- Short term
- Structural unemployment
- When a new industry replaces an old industry forcing skills to become obsolete.
- Jobs never return
- Medium problem
- Unnatural unemployment
- Cyclical unemployment
- Economy does not have enough aggragate damand to employ everyone looking for a job
- Has nothing to do with skills
- Possible to get rid of
- All three figures add up to unemployment rate
|
|
|
Term
|
Definition
| Total demand by all parties (consumers, firms, government entities, foreigners). Falls when the economy slows down. Goes up with the real GDP goes up. |
|
|
