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| the market value of all final goods and services produced within a country during a specific period |
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| goods purchased for resale or use in producing another good or service |
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| Final market goods and services |
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1. : goods and services purchased by their ultimate user
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| household spending on consumer goods and services during the current period. Consumption is a flow concept |
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1. : the flow of private-sector expenditures on durable assets (fixed investments) plus the addition to inventories (inventory investment) during a period. These expenditures enhance our ability to provide consumer benefits in the future.
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| the estimated number of physical capital that is worn out or used up producing goods during a period |
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| Changes in the stock of unsold goods and raw materials during a period |
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| goods and services produced domestically but sold to foreigners |
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| Goods and services produced by foreigners but purchased by domestic consumers, businesses and governments |
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| taxes that increase a business firm’s cost of production and therefore the prices are changed to consumers, examples are sales, excise, and property taxes. |
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| the total income earned by a country’s nationals (citizens) during a period. It is the sum of employee compensation, self-employment income, rents, interest, and corporate profits |
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| Gross National Product (GNP |
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Definition
| The total market value of all final goods and services produced by the citizens of a country. It is equal to the GDP minus the net income of foreigners |
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| : The income that foreigners earn by contributing labor and capital resources to the production of goods within the borders of a country minus the income the nationals of the country earn abroad |
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| values expressed in current dollars |
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| values that have adjusted for the effect of inflation |
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Term
| Consumer Price Index (CPI): |
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Definition
| An indicator of the general level of prices. It attempts to compare the cost of purchasing the market basket bought by a typical consumer during a specific period with the cost of purchasing the same market basket during an earlier period |
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| A price index that reveals the cost during the current period of purchasing the items included in GDP relative to the cost during a base year. Unlike the CPI the GDP deflator also measures the prices of capital goods and services purchased by business and governments. Because of this, it is thought to be a more accurate of changes in the general level of prices than the CPI |
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Term
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Definition
| an increase in the general level of prices of goods and services. The purchasing power of the monetary unit, such as the dollar declines when inflation is present |
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| GDP expressed at current prices. It is often called “money GDP” |
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| GDP adjusted for changes in price level |
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| unreported barter and cash transactions that take place outside recorded market channels. Some are otherwise legal activities undertaken to evade taxes. Others involve illegal activities, such as trafficking drugs and prostitution |
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| Fluctuations in the general level of economic activity as measured by variables such as the rate of unemployment and changes in real GDP |
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| a downturn in economic activity characterized by declining real GDP and rising unemployment. In an effort to be more precise, many economists define a recession as two consecutive quarters in which there is a decline in real GDP |
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| : a prolonged and very severe recession |
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| The number of people 16 years of age and over who are either employed or unemployed. To be classified as unemployed the person must be looking for a job |
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| The term used to describe a person not currently employed who is either 1) actively seeking employment 2) waiting on a job to begin or to return to a job |
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| Labor force participation rate |
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| The number of people in the civilian labor force 16 years of age or over who are either employed or actively seeking employment as a percentage of the total civilian population 16 years of age and over |
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| : the percentage of unemployed people in the labor force. Mathematically it is the equal to the number of people unemployed divided by the number of people in the labor force |
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| Employment/population ratio |
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| The number of people 16 years of age and over employed as civilians divided by the total civilian population 16 years of age and over. The ratio is expressed as a percentage. |
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| unemployment due to constant changes in the economy that prevent qualified unemployed workers from being immediately matched up with existing job openings. It results from imperfect information and search activities related to suitably matching employees with employers |
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Definition
unemployment due to the structural characteristics of the economy that make it difficult for job seekers to find employment and for employers to hire workers. Although job openings are available, they generally require skills many unemployed workers do not have
Cyclical Unemployment: unemployment due to recessionary business conditions and inadequate labor demand |
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Definition
| The level of employment that results from the efficient use of the labor force taking into account the normal rate of unemployment due to information costs, dynamic changes, and the structural conditions of the economy. For the united States, full employment is thought to exist when approximately 95 percent of the labor force is employed |
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| Natural Rate of unemployment |
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Definition
| the “normal” unemployment rate due to frictional and structural conditions in labor markets. It is the unemployment rate that occurs when the economy is operating at a sustainable rate of output. |
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| The level of output that can be achieved and sustained in the future, given the size of the labor force, its expected productivity, and the labor market. Actual output can differ from the economy’s potential output. |
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| an increase in the general level of prices that was not expected by most decision-makers. |
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| an increase in the general level of prices that was expected by the decision-makers |
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| The use of government taxation and expenditure policies for the purpose of achieving macroeconomic goals. |
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| The deliberate control of the money supply, and in cases, credit conditions, for the purpose of achieving macroeconomic goals. |
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| The supply of currency, checking account funds, and traveler’s checks. These items are counted as money because they are used as the means of payment for purchases. |
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Definition
| A highly aggregated market encompassing all resources (labor, physical capital, land, and entrepreneurship) contributing to the production of current output. The labor market is the largest component of the market. |
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| Goods and Services market |
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Definition
| A highly aggregated market encompassing the flow of all final-user goods and services. The market counts all items that enter into GDP. Thus, real output in this market is equal to GDP |
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| a general term used to describe the market that coordinates the borrowing and lending decisions of business firms and households. Commercial banks, savings and loan associations, the stock and bond markets, and insurance companies are important financial institution in this market. |
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| The portion of after-tax income that is not spent consumption. Saving is a “flow” concept |
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| The market in which the currencies of different countries are bought and sold |
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| : The price of one unit of foreign currency in terms of the domestic currency. For example, if it takes $1.50 to purchase an English pound, the dollar-pound exchange rate is $1.50 |
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| A downward-sloping curve showing the relationship between the price level and the quantity of domestically produced goods and services all households, business firms, governments, and foreigners (net exports) are willing to purchase. |
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| The curve showing the relationship between a nation’s price level and the quantity of goods supplied by its producers. In the short run, it is an upward-sloping curve, but in the long run the aggregate supply curve is vertical. |
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| a balance of forces permitting the simultaneous fulfillment of plans by buyers and sellers |
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| The percentage of the amount borrowed that must be paid to the lender in addition to the repayment of the principal. The money interest rate overstates the real cost of borrowing during an inflationary period. When inflation is anticipated, an inflationary premium will be incorporated into this rate. The money interest rate is often called the nominal interest rate. |
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Term
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Definition
| The interest rate adjusted for expected inflation: It indicates the real cost to the borrower in terms of goods and services |
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Term
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Definition
| a component of the money interest rate that reflects compensation to the lender for the expected decrease, due to inflation, in the purchasing power of the principal and interest during the course of the loan. It is determined by the expected rate of future inflation |
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Definition
| An increase in the value of currency relative to foreign currencies. An appreciation increases the purchasing power of the currency over foreign goods. |
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Definition
| a reduction in the value of a currency relative to foreign currencies. A depreciation reduces the purchasing power of the currency over foreign goods |
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| The situation when a country’s imports of goods and services are greater than its exports |
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| The situation when a country’s exports of goods and services are greater than its imports |
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| A change that is foreseen by decision-makers in time for them to make adjustments |
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| a change that decision-makers could not reasonably foresee. The choices they made prior to the change did not take it into account |
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| Consumer sentiment index: |
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Definition
| a measure of the optimism of consumers based on their responses to a set of questions about their current and expected future personal economic situation. Conducted by the University of Michigan, it is based on a representative sample of U.S. households |
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Definition
| The average output produced per worker during a specific time period. It is usually measured in terms of output per hour worked |
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| An unexpected event that temporarily increases or decreases aggregate supply |
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