Download Economic Terms: Labor Force, Output, Inflation, Economic Growth, and National Income and more Quizzes Economics in PDF only on Docsity!
business cycle
is the short-run alternation between economic downturns, known as recessions, and economic upturns, known as expansions. TERM 2
depression
DEFINITION 2 is a very deep and prolonged downturn. TERM 3
Recessions
DEFINITION 3 are periods of economic downturns when output and employment are falling. TERM 4
Expansions
DEFINITION 4 or recoveries, are periods of economic upturns when output and employment are rising. TERM 5
Employment
DEFINITION 5 is the number of people currently employed in the economy.
Unemployment
is the number of people who are actively looking for work but arent currently employed. TERM 7
labor force
DEFINITION 7 is equal to the sum of employment and unemployment. TERM 8
unemployment
rate
DEFINITION 8 is the percentage of the labor force that is unemployed. TERM 9
Output
DEFINITION 9 is the quantity of goods and services produced. TERM 10
Aggregate
DEFINITION 10 output is the economys total production of goods and services for a given time period.
other things equal
assumption
means that all other relevant factors remain unchanged. This is also known as the ceteris paribus assumption. TERM 17
National income and product accounts, or
national accounts
DEFINITION 17 keep track of the flows of money between different sectors of the economy. TERM 18
household
DEFINITION 18 is a person or group of people who share income. TERM 19
firm
DEFINITION 19 is an organization that produces goods and services for sale. TERM 20
Product markets
DEFINITION 20 are where goods and services are bought and sold.
Factor markets
are where resources, especially capital and labor, are bought and sold TERM 22
Consumer spending
DEFINITION 22 is household spending on goods and services. TERM 23
stock
DEFINITION 23 is a share in the ownership of a company held by a shareholder. TERM 24
bond
DEFINITION 24 is a loan in the form of an IOU that pays interest. TERM 25
Government
transfers
DEFINITION 25 are payments that the government makes to individuals without expecting a good or service in return.
exports.
Goods and services sold to other countries are TERM 32
imports.
DEFINITION 32 Goods and services purchased from other countries are TERM 33
Inventories
DEFINITION 33 are stocks of goods and raw materials held to facilitate business operations. TERM 34
Investment spending
DEFINITION 34 is spending on new productive physical capital, such as machinery and structures, and on changes in inventories. TERM 35 DEFINITION 35 Simplified Circular Flow
Complex Circular flow TERM 37
Final goods and services
DEFINITION 37 are goods and services sold to the final, or end, user.CARS! TERM 38
Intermediate goods and services
DEFINITION 38 are goods and services bought from one firm by another firm to be used as inputs into the production of final goods and services.STEEL, or GLASS for CARS TERM 39
Gross domestic product
DEFINITION 39 or GDP, is the total value of all final goods and services produced in the economy during a given year. TERM 40
Aggregate spending
DEFINITION 40 the total spending on domestically produced final goods and services in the economyis the sum of consumer spending (C), investment spending (I), government purchases of goods and services (G), and exports minus imports (X IM).Agg Spend (GDP)= C + I + G + (X - IM)
Not Included in GDP
Intermediate goods and servicesInputsUsed goodsFinancial assets such as stocks and bondsForeign-produced goods and services TERM 47
Aggregate output
DEFINITION 47 is the total quantity of final goods and services produced within an economy. TERM 48
Real GDP
DEFINITION 48 is the total value of all final goods and services produced in the economy during a given year, calculated using the prices of a selected base year TERM 49
Nominal GDP
DEFINITION 49 is the total value of all final goods and services produced in the economy during a given year, calculated with the prices current in the year in which the output is produced. TERM 50
Chain-linking
DEFINITION 50 is the method of calculating changes in real GDP using the average between the growth rate calculated using an early base year and the growth rate calculated using a late base year.
GDP per capita
is GDP divided by the size of the population; it is equivalent to the average GDP per person. TERM 52
Employed people
DEFINITION 52 people are currently holding a job in the economy, either full time or part time. TERM 53
Unemployed people
DEFINITION 53 are actively looking for work but arent currently employed. TERM 54
Labor force
DEFINITION 54 is equal to the sum of the employed and the unemployed. TERM 55
labor force participation
rate
DEFINITION 55 is the percentage of the population aged 16 or older that is in the labor force.LFPR = Labor Force Population over 16 *
Frictional unemployment
is unemployment due to the time workers spend in job search.Frictional unemployment is unemployment due to the time workers spend searching for jobs. It is inevitable because workers may leave one job in search of another for a variety of reasonsWhen the unemployment rate is low, frictional unemployment will account for a larger share of total unemployment because other sources of unemployment will be diminished. So the share of total unemployment composed of the frictionally unemployed will rise. TERM 62
Structural unemployment
DEFINITION 62 is unemployment that results when there are more people seeking jobs in a labor market than there are jobs available at the current wage rate. TERM 63
Efficiency wages
DEFINITION 63 are wages that employers set above the equilibrium wage rate as an incentive for better employee performance. TERM 64
natural rate of
unemployment
DEFINITION 64 is the unemployment rate that arises from the effects of frictional plus structural unemployment.Nat = Fric + Structuralthe natural rate of unemployment changes over time, and it can be affected by economic policies. TERM 65
Cyclical unemployment
DEFINITION 65 is the deviation of the actual rate of unemployment from the natural rate.Actual = Nat + Cyclical
In 1980 Americans
were
dismayed about the state of the economy for two reasons: the unemployment rate was high, and so was inflation. In fact, the high rate of inflation, not the high rate of unemployment, was the principal concern of policy makers at the timeso much so that Paul Volcker, the chairman of the Federal Reserve Board (which controls monetary policy), more or less deliberately created a deep recession in order to bring inflation under control. Only in 1982, after inflation had dropped sharply and the unemployment rate had risen to more than 10%, did fighting unemployment become the chief priority. TERM 67
Real wage
DEFINITION 67 is the wage rate divided by the price level. TERM 68
Real income
DEFINITION 68 is income divided by the price level. TERM 69
Inflation
rate
DEFINITION 69 is the percent change per year in a price indextypically the consumer price index.Inflation rate = Price Level in Year 2 - PL in Year 1 Price Level in Year 1 TERM 70
Shoe-leather costs
DEFINITION 70 are the increased costs of transactions caused by inflation.
Aggregate price level
is a measure of the overall level of prices in the economy. TERM 77
Market basket
DEFINITION 77 is a hypothetical set of consumer purchases of goods and services. TERM 78
Price index
DEFINITION 78 measures the cost of purchasing a given market basket in a given year. The index value is normalized so that it is equal to 100 in the selected base year.Price Index in a given year = Cost of Basket in a Given Year Cost of Basket in Base Year
TERM 79
Inflation Rate
DEFINITION 79 Inflation rate = PI in Year 2 - PI in Year 1 PI in Year 1 * TERM 80
Consumer price index, or CPI,
DEFINITION 80 measures the cost of the market basket of a typical urban American family.A small change in the CPI has large consequences for those dependent on Social Security payments
Producer price index, or PPI
measures changes in the prices of goods and services purchased by producers.wholesale price indexoften regarded as an early warning signal of changes in the inflation rate. TERM 82
GDP
deflator
DEFINITION 82 for a given year is 100 times the ratio of nominal GDP to real GDP in that year.Nominal/real * 100
