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Definition
| theory that markets will correct themselves |
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Term
| theory behind classical economics |
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Definition
| if wages decrease, then costs decrease, then prices decrease |
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| economic declines are caused by inadequate spending and can be fixed by govt intervention |
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| govt should borrow to increase spending on programs to get people working |
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| influences money system through interest rates; job of federal reserve |
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| changes in taxes/spending to affect overall spending in economy; job of government |
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| short-run alternation between economic downturns and upturns measured in GDP or unemployment |
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| period of 6+ months where output and employment are falling |
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Definition
| period of 6+ months where output and employment are rising |
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Term
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Definition
| policy efforts to reduce the severity of recessions |
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Term
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Definition
| sustained upward trend in economy's output over time |
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| how the standard of living increases over time |
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Definition
| increase in avg aggreggate price level |
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Term
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Definition
| decrease in avg aggregate price level |
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Term
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Definition
| change in aggregate price level |
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Term
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Definition
| aggregate price level is changing slowly |
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Term
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Definition
| economy that trades goods/services with other countries |
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Term
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Definition
| value of imports is greater than exports |
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Term
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Definition
| value of exports is greater than imports |
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Term
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Definition
| =consumption + govt spending + investments + exports - imports |
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Term
| national income and product accounts |
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Definition
| accounts keep track of money flowing between parts of economy |
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Term
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Definition
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Term
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Definition
| =consumption + savings for that year |
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Term
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Definition
| =disposable income not spent on consumption |
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Term
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Definition
| stocks of goods/raw materials held to facilitate business operations |
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Term
| changes in inventories means... |
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Definition
| new investments for the year. found by calculating |
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Term
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Definition
| changes to inventories + spending in machinery, physical capital + construction |
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Term
| finished goods and services |
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Definition
| goods consumed by end-users |
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Term
| intermediate goods/services |
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Definition
| goods/services consumed for producing goods |
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Term
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Definition
| measures total value of all final goods/services produced in economy |
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Term
| aggregate spending also means... |
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Definition
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Term
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Definition
1. add all value added by producers
2. C+G+I+E-Im
3. add all income paid to factors of production |
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Term
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Definition
| =wages + interest income + rental income + profits |
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Term
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Definition
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Term
| value added method of calculating GDP |
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Definition
| = sales price - cost of intermediate good |
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Term
| income approach to calculate GDP |
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Definition
| = add wages + interest payments + rent + profits involved with producing the good |
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Term
| Included in GDP calculations |
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Definition
domestically produced final goods/services
2. capital goods
3. new construction
4. changes to inventories |
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Term
| not included in GDP calculations |
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Definition
1. intermediate goods/services
2. inputs
3. financial assets (stocks,bonds)
4. used goods
5. foreign goods |
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Term
| how economic growth is measured |
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Definition
| output. measures something... |
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Term
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Definition
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Term
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Definition
| created natinoal income accounts |
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Term
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Definition
| GDP adjusted for inflation |
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Term
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Definition
| GDP calculated in the current year's prices |
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Term
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Definition
| method of calculating real GDP based on early base year and late base year |
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Definition
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Term
| to measure aggregate price level |
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Definition
1. calculate market basket cost
2. compare to other years prices |
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Term
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Definition
| ratio of current year's market basket to cost in the base year multipled by 100 |
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Term
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Definition
| yearly percentage change in price index, usually the CPI |
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Term
| CPI is overstated for (2 reasons) |
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Definition
1. assumed fixed market basket of goods
2. doesn't allow for new products |
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Term
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Definition
| similar index to CPI measures goods at the wholesale price |
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Term
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Definition
| measures price level by calculating ratio of nominal to real GDP |
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Term
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Definition
| [(nominal gdp)/(real gdp)] * 100 |
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Term
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Definition
| tying wages/payments to CPI |
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Term
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Definition
| number of people currently employed |
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Term
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Definition
| (unemployment/labor force) * 100 |
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Term
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Definition
| unemployment + employment |
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Term
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Definition
| people who give up the job search due to the economy |
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Term
| marginally attached workers |
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Definition
| people who give up job searching, part of labor force |
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Term
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Definition
| unemployment caused by job searching |
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Term
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Definition
| unemployment caused by more people than there are jobs |
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Term
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Definition
| wage employers set above equilibrium wages to attract better candidates |
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Term
| natural rate of unemployment = |
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Definition
| = frictional unemployment + structural unemployment |
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Term
| actual rate of unemployment |
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Definition
| = frictinoal + structural + cyclical unemployment |
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Term
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Definition
| unemployment caused by recessions |
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Term
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Definition
| nominal wages divided by CPI |
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Term
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Definition
| increased cost of transactions due to inflation |
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Term
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Definition
| real costs of changing a listed price |
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Term
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Definition
| inflation makes using money as a means of measurement less reliable |
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Term
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Definition
| interest rate expressed in dollar terms |
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Term
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Definition
| = nominal interest rate - inflation rate |
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Term
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Definition
| process of reducing inflation rate |
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Term
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Definition
| theory inflation and employment are directly proportional |
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Term
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Definition
| inflation and unemployment both increased |
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