Term
| gross domestic product (GDP) |
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Definition
| primary measure of the economy's performance is its annual total output of goods and services, also called aggregate output |
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Definition
| good and services that are measure for purchased for resale or further processing or manufacturing |
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| goods and services that are purchased for final use by the consumer, not for resale or for further processing or manufacturing |
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| inclusion of the value of intermediate goods that would result in distortion of the value of GDP |
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Definition
| the market value of a firm's output LESS the value of the inputs the firm has bought from others. |
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| security payments, welfare payments, veterans' payments that government makes directly to households. Recipients contribute nothing to current production |
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| private transfer payments |
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Definition
| ie. $ parents give child at xmas time. These produce no output. Transfer funds from one private individ. to another, dont enter GDP. |
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Term
| stock market transactions |
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Definition
| Create nothing in way of current prod. & are not included in GDP. |
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Definition
| or output approach; way of viewing GDP as the sum of all the money spent in buying it. |
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| or allocations approach, way of viewing GDP in terms of the income derived or created from producing it. |
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Term
| personal consumption expenditures |
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Definition
| Covers all expenditures by households on durable consumer goods, nondurable consumer goods, and consumer expenditures for services (Dr.), represented as C. |
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Term
| gross private domestic investment |
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Definition
| all final purchases of machines & tools by business enterprises, construction, & changes in inventory. Represented as I(subscrore)g |
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Term
| net private domestic investment |
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Definition
ONLY investment in the form of added capital.
net investment=gross investment-depreciation |
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Definition
| amount of capital that is used up over the course of a year |
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| expenditures for goods and services that government consumes in providing public services & expenditures for social capital such as schools/highways |
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| parts of corporate profits that are paid to corporate stockholders & flow to households |
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| undistributed corporate profits |
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Definition
| aka retained earnings. Are saved by corporations to be invested later in new equipment. |
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| all the income that flows to American-supplied resources, plus taxes on production & imports. |
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Term
| consumption of fixed capital |
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Definition
| huge depreciation charge made against private and social capital ea. yr |
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Definition
| =GDP-depreciation. GDP adjusted for depreciation.Makes allowances for replacing the capital goods used up in ea. yr's production |
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Definition
| all income received whether earned or unearned. |
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Definition
| aka unadjusted GDP. GDP based on prices that prevailed when the output was produced |
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| aka adjusted GDP. GDP that has been deflated or inflated to reflect changes in a price level. |
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| measure of the price of a speficied collection of goods and services called a "turkey basket" in a given year as compared to the price of an identical collection of goods and services in a reference year. |
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| increase in real GDP over some period of time or per capita over a period of time |
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| per capita output. REAL GDP/size of population. |
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| measured broadly as real output per unit of input |
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| alternating rises and declines in the level of economic activity over several years. |
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Term
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Definition
| when business activity reaches temporary maximum |
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Definition
| period of decline in total output, income, and employment. downturn, lasting 6 months or more. |
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Definition
| output & employment "bottom out" at their lowest levels. |
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Definition
| period in which real GDP, income, and employment rise. |
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Definition
| consists of ppl who are able and willing to work |
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| % of the labor force unemployed. unemployed/labor forced*100=unemployment rate |
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| ppl that drop out of labor force after being unsuccessful |
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Definition
| search/wait unemployment. workers who are either searching or waiting for jobs. |
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Definition
| change over time in consumer demand changes possible jobs. |
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| Unemployment that is caused by a decline in total spending that typically begins in recession phase |
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Term
| full employment rate of unemployment rate//natural rate of unemployment(NRU) |
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Definition
| occurs when the number of job seekers = number of job vacancies. |
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| real GDP that occurs when the economy is "fully employed" |
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| difference between actual and potential GDP |
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| indicates that for ever 1% pt. by which the actual unemployment rate exceeds the natural rate, a negative GDP gap of 2% occurs |
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Definition
| rise in general level of prices |
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Term
| consumer price index (CPI) |
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Definition
| main measure of inflation compiled by Bureau of Labor Stat's (BLS) |
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Term
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Definition
| "too much spending chasing too few goods", when resources are fully employed and business sector cannot expand to respond to excess demand by expanding output. demand is pulling price level downward. |
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Term
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Definition
| When output and employment are declining while price level is rising. One major source is supply shocks. Costs push price level upward |
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Term
| per-unit production costs |
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Definition
average cost of a particular level of output.
=total input cost/unit of output |
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Definition
| number of dollars received as wages,rent,interest,or profits |
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Term
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Definition
measure of the amt of goods and services nominal income can buy; purchasing power of nominal income (adjusted income)
=nominal income/price index |
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Definition
measure of the amt of goods and services nominal income can buy; purchasing power of nominal income (adjusted income)
=nominal income/price index |
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Definition
| income receiver may be able to avoid or lessen that adverse effects of inflation on real income |
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Definition
| inflation whose full extent was not anticipated |
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Term
| cost-of-living adjustments (COLAs) |
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Definition
| benefits automatically increase when the CPI increases, preventing erosion of benefits from inflation |
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| percentage increase in purchasing power that the borrower pays the lender |
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Definition
| percentage increase in money that the borrow pays the lender |
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| extraordinarily rapid inflation |
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| reference line that bisects the 90 degree angle formed by the two axes on the graph. |
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| aka consumption function, which reflects the direct consumption-disposable income relationship. |
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Definition
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| income level at which households plan to consume their entire incomes |
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Term
| average propensity to consume(APC) |
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Definition
| fraction/% of total income that is consumed |
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Term
| average propensity to save (APS) |
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Definition
| fraction of total income that is saved |
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Term
| marginal propensity to consume(MPC) |
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Definition
| proportion/fraction of any change in income consumed (the marginal income) |
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Term
| marginal propensity to save |
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Definition
| proportion/fraction of any change in income saved (extra, marginal savings) |
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Term
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Definition
| when events boost the value of existing wealth households increase their spending and reduce their saving. Shifts consumption schedule upwards and savings schedule downward |
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Definition
| amount of profit you expect to gain |
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Definition
| shows the amount of investment forthcoming at each real interest rate |
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Definition
| determines how much larger the change will be. Ratio of change in GDP to initial change in spending. |
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Definition
| shows the amount of investment forthcoming at each level of GDP |
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Definition
| investment schedule showing the amount business firms collectively intend to invest at each possible level of GDP |
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Term
| aggregate expenditures schedule |
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Definition
shows the amount that will be spent at each possible output or income level
Consumption+investment |
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Term
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Definition
| when company produces at effecient level leaving no reason for the company to alter their rate of production |
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Term
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Definition
| withddrawl of spending from the income-expenditures stream. Causes consumption to be less than total output or GDP |
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Term
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Definition
| investment, purchase of capital goods |
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Term
| unplanned changes in inventories |
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Definition
| when firms may decide to increase/decrease their inventories due to production problems |
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Definition
| tax of a constant amt. or a tax yielding the same amt of revenue at each level ofGDP. |
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Term
| recessionary expenditure gap |
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Definition
| amount by which aggregate expenditures at full employment GDP fall short of those required to achieve the full employment GDP |
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Term
| inflationary expenditure gap |
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Definition
| amount by which economy's aggregate expenditures at full employment GDP exceed those just necessary to achieve the full employment GDP |
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Term
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Definition
| schedule or curve that shows amount of real output that buyers collectively desire to purchase at each possible price level. relationship between price level and amount of real GDP demanded is negative/inverse. |
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Term
| aggregate demand-aggregate supply model (AD-AS model) |
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Definition
| enables us to analyze changes in real GDP and the price level simultaneously. |
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Term
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Definition
| tendency for increases in price level to lower the real value (purchasing power) of financial assets with fixed money value and as result, to reduce total spending and real output, conversely decreases price level. |
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Term
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Definition
| downard slow.tendency for increases in price level to increase the demand for money, raise interest rates, and as result- reduce total spending and real output in the economy. |
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Term
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Definition
| when u.s. price level rises relative to foreign price levels, foreigners buy less U.S. goods and Americans buy more foreign goods so u.s. exports fall and u.s. imports rise. [rise in price level reduces the quantity of u.s. goods demanded as net exports] |
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Term
| determinants of aggregate demand |
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Definition
| aka aggregate demand shifters ;; change in one of the determinants of aggregate demand that directly changes the amount of real GDP; change in consumer spending, change in investment spending, change in gov't spending, change in net export spending. |
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Term
| long-run aggregate supply |
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Definition
| (vertical), wages and other input prices rise or fall to match changes in price levels |
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Term
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Definition
| schedule or curve showing level of real domestic output firms will produce at each price level |
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| short-run aggregate supply curve |
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Definition
| (upsloping, direct/positive relationship between price level & real output). Price level declines reduce real profits and cause the economy(firm) to reduce its output |
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Term
| determinants of aggregate supply |
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Definition
| aggregate supply shifters, collectively position the aggregate supply curve and shift the curve when they change ; change input prices, change in productivity, and change in legal-institutional environment. |
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Definition
| price level that equalizes the amounts of real output demanded and supplied |
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Definition
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Definition
| cost of printing new menus when a restaurant changes prices |
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Definition
| wages that elicit max work effort thus minimizing labor costs per unit of output |
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