Term
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Definition
| examines the functioning of individual industries, firms, and households |
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Term
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Definition
deals with the economy as a whole
national income (GDP)
national unemployment
overall prices |
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Definition
| prices that do not always adjust rapidly to maintain equality between quantity supplied and quantity demanded |
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Term
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Definition
| the cycle of short-term ups and downs in the economy |
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Term
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Definition
| the total quantity of goods and services produced in an economy in a given period |
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Term
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Definition
| a period during which aggregate output declines. Conventionally, a period in which aggregate output declines for two consecutive quarters |
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Term
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Definition
| a prolonged and deep recession |
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Term
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Definition
| the period in the business cycle from a trough up to a peak during which output and employment grow |
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Term
| contraction, recession, or slump |
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Definition
| the period in the business cycle from a peak down to a trough during which output and employment fall |
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Term
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Definition
the ratio of the number of people unemployed to the local number of people in the labor force
rate = unemp. / employ + unemploy |
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Term
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Definition
| an increase in the overall price level |
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Term
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Definition
| a period of very rapid increases in the overall price level |
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Term
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Definition
| a decrease in the overall price level |
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Term
| the components of the macroeconomy |
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Definition
housholds
firms
governments
the rest of the world (trade with the rest of the world) |
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Term
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Definition
| government policies concerning taxes and spending |
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Term
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Definition
| the tools used by the Federal Reserve to control the quantity of money, which in turn affects interest rates |
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Term
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Definition
| the period of severe economic contraction and high unemployment that began in 1929 and continued throughout the 1930s |
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Term
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Definition
| The phrase used to refer to the government’s role in influencing inflation and unemployment |
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Term
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Definition
| a situation of both high inflation and high unemployment |
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Term
| gross domestic product (GDP) |
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Definition
| the total market value of all final goods and services produced within a given period by factors of production located within a country |
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Term
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Definition
| goods and services produced for final use, no intermediate goods |
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Term
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Definition
goods that are produced by one for use in further processing by another firm
flour to a baker
tires to a car manufacturer
lumber to a builder |
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Term
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Definition
| new production, no previously built goods |
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Term
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Definition
| a method of computing GDP that measures the total amount spent on all final goods and services during a given period |
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Term
| four main categories of expenditure |
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Definition
-personal consumption expenditures (C): household spending on consumer goodsd
-gross private domestic investment (I): spending by firms and households on new capital, that is, plant, equipment, inventory, and new residential structures
-government consumption and gross investment (G)
-net exports (EX- IM): net spending by the rest of the world, or exports (EX) minus imports (IM) |
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Term
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Definition
| GDP = C + I + G + (EX- IM) |
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Term
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Definition
| the current prices that we pay for goods and services |
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Term
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Definition
gross domestic product measured in current dollars. Nominal GDP grows for two reasons
-production increase
-price increase |
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Term
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Definition
gross domestic product measured using constant dollars. Ral GDP grows for one reason:
-production increase |
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Term
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Definition
| the part of the economy in which transactions take place and in which income is generated that is unreported and therefore not counted in GDP |
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Term
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Definition
| the growth rate of the output of the entire economy |
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Term
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Definition
| the growth rate of output per person in the economy |
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Term
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Definition
| the growth rate of output per worker, connection between technology and productivity growth |
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Term
| discretionary fiscal policy |
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Definition
changes in taxes or spending that are the result of deliberate changes in government policy
exp: federal government passed a stimulus package (big spending package to get the economy back on its feet) |
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Term
| non-discretionary fiscal policy |
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Definition
changes in taxes or spending that are not the result of deliberate changes in government policy
exp: spending on social security- spending will increase but the government policy isn’t changing |
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Term
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Definition
the difference between what a government spends (G) and what it collects in taxes (T) in a given period: G - T
budget deficit = G - T
deficit = G > T
surplus = G < T |
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Term
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Definition
the accumulation of all past deficits
current government debt is 17 trillion |
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Term
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Definition
| what the federal budget would be if the economy were producing at the full-employment level of output |
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Term
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Definition
| the deficit that remains at full employment |
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Term
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Definition
| the deficit that occurs because of a downturn in the business cycle |
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Term
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Definition
| the budget of the federal government |
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Term
| what is the 'budget' made up of |
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Definition
- it is a political document that dispenses favors to certain groups or regions and places burdens on others
-it is a reflection of goals the government wants to achieve
- the budget may be an embodiment of some beliefs about how (if at all) the government should manage the macroeconomy |
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Term
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Definition
| what the federal budget would be if the economy were producing at the full-employment level of output |
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Term
| two reasons why fiscal policy is changed |
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Definition
-Difference view on the role of the Federal government (medicaid & medicare)
-Smooth the business cycle (stimulus packages) |
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Term
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Definition
| a person 16 years or older who is not working, is available for work, and has made specific efforts to find work during the previous 4 weeks |
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Term
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Definition
| a person who is not looking for work because he does not want a job or has given up looking |
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Term
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Definition
| the number of people employed plus the number unemployed |
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Term
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Definition
| portion of unemployment that is due to the normal working of the labor market; used to denote short-run jobs |
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Term
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Definition
the portion of unemployment that is due to changes in the structure of the economy that results in a significant loss of jobs in certain industries
exp: home phones >>> cell phones |
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Term
| natural rate of unemployment |
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Definition
| unemployment that occurs as a normal part of the economy, sometimes taken as the sum of frictional and structural unemployment |
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Term
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Definition
| ^ in employment that occurs during recessions and depressions |
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Term
| consumer price index (CPI) |
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Definition
| computed each month using a bundle that is meant to represent the 'market basket' purchased monthly by the urban consumer |
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Term
| producer price index (PPI) |
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Definition
| measures at prices that producers receive for products at all stages in the production process |
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Term
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Definition
| the budget of the federal government |
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Term
| 3 things that really make up the budget |
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Definition
1. it is a political document that dispenses favors to certain groups or regions and places burdens on others
2. it is a reflection of goals the government wants to achieve
3the budget may be an embodiment of some beliefs about how (if at all) the government should manage the macroeconomy |
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Term
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Definition
| what the federal budget would be if the economy were producing at the full-employment level of output |
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Term
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Definition
| revenue and expenditure items in the federal budget that automatically change with the state of the economy in such a way as to stabilize GDP |
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Term
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Definition
| the negative effect on the economy that occurs when average tax rates increase because taxpayers have moved into higher income brackets during an expansion |
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Term
| examples of progressive tax and regressive tax |
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Definition
| federal income tax is a progressive tax, federal payroll tax is a regressive tax |
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Term
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Definition
| the direct exchange of goods and services for other goods and services |
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Term
| What makes an ‘asset’ money? |
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Definition
1. Medium of Exchange
all sellers of goods and services accept this asset as payment
2. Store of Value
an asset that can be used to transport purchasing power from one time period to another
3. Unit of Account
all goods and services are priced in terms of this asset |
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Term
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Definition
| items used as money that also have intrinsic value in some other use (gold coin) |
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Term
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Definition
| items designated as money that are intrinsically worthless (Federal Reserve notes) |
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Term
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Definition
| money that a government has required to be accepted in settlement of debts (Federal Reserve notes) |
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Term
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Definition
| Money that can be directly used for transactions |
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Term
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Definition
| close substitutes for transactions money, such as savings accounts and money market accounts |
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