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Microeconomics
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the study of how households and firms make decisions and how they interact in markets
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Macroeconomics
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the study of economy-wide phenomena, including inflation, unemployment, and economic growth
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Gross domestic product (GDP)
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the market value of all final goods and services produced within a country in a given period of time
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Consumption
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spending by households on goods and services, with the exception of purchases of new housing
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Investment
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spending on capital equipment, inventories, and structures, including household purchases of new housing
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Government purchases
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spending on goods and services by local, state, and federal governments
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Net exports
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spending on domestically produced goods by foreigners (exports) minus spending on foreign goods by domestic residents (imports)
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Nominal GDP
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the production of goods and services valued at current prices
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Real GDP
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the production of goods and services valued at constant prices
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GDP deflator
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a measure of the price level calculated as the ratio of nominal GDP to real GDP times 100
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Consumer price index (CPI)
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a measure of the overall cost of the goods and services bought by a typical consumer
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Inflation rate
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the percentage change in the price index from the preceding period
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Producer price index
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a measure of the cost of a basket of goods and services bought by firms
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Indexation
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the automatic correction by law or contract of a dollar amount for the effects of inflation
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Nominal interest rate
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the interest rate as usually reported without a correction for the effects of inflation
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Real interest rate
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the interest rate corrected for the effects of inflation
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