Term
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Definition
| Not enough resources to satisfy all of our desires. |
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Term
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Definition
| when we use scarce resources to produce one thing, we give up the opportunity to use those resources in another way, what is given up to gain something else |
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Term
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Definition
| alternative combinations of final goods/services that could be produced with all resources and technology |
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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 nation's borders in a given time period |
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Term
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Definition
| the dollar value of GDP divided by the total population |
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Term
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Definition
| an increase in output (real GDP) |
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Term
| What are the 4 major uses of total output (GDP)? |
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Definition
| Consumption, Investment, Government Services, Net Exports |
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Term
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Definition
| the ability of a country to produce a specific good at a lower opportunity cost than its trading partners |
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Term
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Definition
| any place where factors of production (land, labor, capital) are bought and sold |
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Term
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Definition
| any place where finished goods and services (products) are bought and sold |
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Term
| What are the determinants of market demand? |
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Definition
| tastes, income, other goods, expectations, number of buyers |
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Term
| What are the determinants of market supply? |
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Definition
| technology, factor costs, other goods, taxes, subsidies, expectations, number of sellers |
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Term
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Definition
| the use of market prices and sales to signal desired outputs (or resource allocations) |
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Term
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Definition
| an imperfection in the market mechanism that prevents optimal outcomes |
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Term
| What are the four specific sources of market failure? |
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Definition
| public goods, externalities, market power, equity |
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Term
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Definition
| a good or service whose consumption by one person excludes consumption by others |
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Term
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Definition
| a good or service whose consumption by one person does not exclude consumption by others |
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Term
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Definition
| the inability of labor force participants to find jobs |
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Term
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Definition
| an increase in the average level of prices of goods and services |
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Term
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Definition
| a tax system in which tax rates rise as income rises |
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Term
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Definition
| a tax that levies the same rate on every dollar of income |
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Term
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Definition
| a tax system in which tax rates fall as incomes rise |
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Term
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Definition
| government intervention that fails to improve economic outcomes |
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Term
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Definition
| the value of final output produced in a given time period, measured in the prices of that period |
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Term
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Definition
| the value of final output produced in a given period, adjusted for changing prices |
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Term
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Definition
| the consumption of capital in the production process; the wearing out of plant and equipment |
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Term
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Definition
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Term
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Definition
| total investment expenditure in a given time period |
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Term
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Definition
| gross investment less depreciation |
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Term
| What is the equation for GDP? |
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Definition
GDP=C+I+G+(X-M)
C=consumption expenditure
I=investment expenditure
G=government expenditures
X=exports
M=Imports |
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Term
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Definition
| total income earned by current factors of production; GDP less depreciation and indirect business taxes, plus net foreign factor income |
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Term
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Definition
| incomer received by households before payment of personal taxes |
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Term
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Definition
| aftertax income of households; personal income less personal taxes |
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Term
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Definition
| 1 percent more unemployment results in 2 percent less output |
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Term
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Definition
| (# of unemployed people)/(labor force) |
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Term
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Definition
| an individual who isnt actively seeking employment but would look for or accept a job if one were available |
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Term
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Definition
| people seeking full-time paid employment who work only part time or are employed at jobs below their capability |
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Term
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Definition
| unemployment due to seasonal changes in employment or labor supply |
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Term
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Definition
| brief periods of unemployment experienced by people moving between jobs or into the labor market |
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Term
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Definition
| unemployment caused by a mismatch between the skills (or locations) of job seekers and the requirements (or location) of available jobs |
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Term
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Definition
| unemployment attributable to a lack of job vacancies, that is, to an inadequate level of aggregate demand |
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Term
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Definition
| the lowest rate of unemployment compatible with price stability; variously estimated at between 4% and 6% unemployed |
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Term
| Natural Rate of Unemployment |
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Definition
| long term rate of unemployment determined by structural forces in labor and product markets |
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Term
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Definition
| the relocation of production to foreign countries |
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Term
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Definition
| a decrease in the average level of prices of goods and services |
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Term
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Definition
| the amount of money income received in a given time period, measured in current dollars |
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Term
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Definition
| income in constant dollars; nominal income adjusted for inflations |
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Term
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Definition
| income in constant dollars; nominal income adjusted for inflation |
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Term
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Definition
| the absence of significant changes in the average price level; officially defined as a rate of inflation of less than 3% |
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Term
| Cost-of-Living Adjustments (COLA) |
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Definition
| automatic adjustments of nominal income to the inflation rate |
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Term
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Definition
| when the economy is already producing at full capacity but consumers are willing and able to buy even more goods, the consumers could end up buying more output than what the economy is producing, as consumers sought to acquire more goods, inventory would begin to empty, producers would then raise prices, a demand-driven rise in average prices |
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Term
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Definition
| when hurricanes katrina and rita destroyed oil producing facilities in the gulf, oil prices increased abruptly, raising transportation and production costs in a broad array of industries. To cover these higher costs, producers raised output prices. Also, if labor unions were able to abruptly pushup wage rates, the costs of production would increase, putting pressure on product prices. |
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Term
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Definition
| a decline in total output (real GDP) for two or more consecutive quarters |
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Term
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Definition
| a period during which real GDP grows, but at a rate below the long term trend of 3% |
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Term
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Definition
| Markets are inherently stable, no need for government intervention. Self-adjusting market will correct itself of deviations from its long term growth trend. |
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Term
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Definition
| Market driven economies are inherently unstable. Small disturbances could be magnified by market mechanism. Depression was not a unique event and could occur again if we relied on self adjustment. Government intervention is required. when the economy overheats, cool it down with higher taxes and less spending (tight money policies) |
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Term
| What are the determinants of macro performances? |
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Definition
| internal market forces, external shocks, policy levels |
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Term
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Definition
| the total quantity of output (real GDP) demanded at alternative price levels in a given time period |
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Term
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Definition
| the total quantity of output producers are willing and able to supply at alternative price levels in a given time period |
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Term
| Average Propensity to Consume (APC) |
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Definition
| total consumption in a given period divided by total disposable income |
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Term
| Marginal Propensity to Consume (MPC) |
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Definition
| the fraction of each additional (marginal) dollar of disposable income spent on consumption; the change in consumption divided by the change in disposable income |
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Term
| Marginal Propensity to Save (MPS) |
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Definition
| the fraction of each additional dollar of disposable income not spent- that is, saved. MPS = 1-MPC |
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Term
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Definition
| the amount by which aggregate spending at full employment falls short of full employment output |
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Term
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Definition
| the amount by which aggregate spending at full employment exceeds full employment output |
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Term
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Definition
| the value of total output (real GDP) produces at full employment |
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Term
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Definition
| income not spent directly on domestic output but instead diverted from the circular flow, for example, saving, imports, taxes |
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Term
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Definition
| an addition of spending to the circular flow of income |
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Term
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Definition
the multiple by which an initial change in spending will alter total expenditure after an infinite number of spending cycles
= 1/(1-MPC) |
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Term
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Definition
| payments to individuals for which no current goods or services are exchanged, such as Social Security , welfare, unemployment benefits |
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Term
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Definition
| tax cuts or spending hikes intended to increase (shift) aggregate demand |
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Term
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Definition
| the amount of additional AD needed to achieve full employment after allowing for price level changes |
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Term
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Definition
| tax hikes or spending cuts intended to reduce (shift) AD |
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Term
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Definition
| the amount by which AD must be reduced to achieve full employment equilibrium after allowing for price level changes |
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Term
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Definition
| a reduction in private sector borrowing (and spending)caused by increased government spending |
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Term
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Definition
| the use of government taxes and spending to alter macroeconomic outcomes |
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Term
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Definition
| the use of borrowed funds to finance government expenditures that exceed tax revenues |
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Term
| Discretionary Fiscal Spending |
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Definition
| those elements of the federal budget not determined by past legislative or executive commitments |
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Term
| Discretionary Fiscal Spending |
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Definition
| those elements of the federal budget not determined by past legislative or executive commitments |
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Term
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Definition
| tax cuts or spending hikes intended to increase (shift) AD |
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Term
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Definition
| federal expenditure or revenue item that automatically responds countercyclically to changes in national income, like unemployment benefits, income taxes |
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Term
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Definition
| that portion of the budget balance attributable to short run changes in economic conditions |
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Term
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Definition
| federal revenues at full employment minus expenditures at full employment under prevailing fiscal policy |
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Term
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Definition
| an increase in private sector borrowing (and spending) caused by decreased government borrowing |
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Term
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Definition
| a measure of changes in the average price of consumer goods and services |
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Term
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Definition
| doing the minimum requirements to be considered unemployed |
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