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Macroeconomics
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The study of the economy as a whole
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Economic System
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the method used by a society to produce and distribute goods and services
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Traditional Economy
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typically an agricultural economy where things are done the same as they have always been done
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command economy
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an economy where economic decisions are passed down from government authority and where resources are owned by the government
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Gross Domestic Product (GDP)
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A measurement of the total goods and services produced within a country.
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Trade Balance
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gap between exports and imports (X-M)
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Trade Surplus
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a country exports are more than it imports
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trade deficit
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Country's imports are more than its exports
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Calculate GDP
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GDP=C+I+G+(X-M)
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Durable Goods
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Nonlong lasting goods like cars and refrigerators
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Nondurable gooods
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Short-lived goods like food or clothing
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Services
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intangible products
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Structures
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a building used as a residence, factory, office building, retail store, or for other purposes
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Final goods
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products that are purchased by their end users
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Gross National Product (GNP)
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output produced by a country's labor and businesses regardless of location
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Net National Product (NNP)
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GDP minus depreciation
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Depreciation
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A decrease or loss in value
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Real GDP
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GDP adjusted for inflation
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Nominal GDP
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GDP measured in current prices and not adjusted for inflation
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GDP deflator
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a price index measuring the average prices of all goods and services included in the economy
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GDP per capita
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GDP divided by population
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standard of living
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all elements that affect people's happiness, whether these elements are bought and sold in the market or not
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GDP does not include
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-leisure time
-actual levels of environmental cleanliness, health, and learning
-production that is not exchanged in the market
-the level of inequality in society
-what technology and products are available
-actual levels of environmental cleanliness, health, and learning
-production that is not exchanged in the market
-the level of inequality in society
-what technology and products are available
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Labor Porductivity
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the value of what is produced per worker, or per hour worked
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human capital
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the skills and knowledge gained by a worker through education and experience
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technological change
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change in invention(knowledge) and innovation (create something new)
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labor force
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employed + unemployed
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unemployment rate
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the percentage of adults who are in the labor force and thus seeking jobs, but who do not have jobs
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Calculate unemployment rate
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unemployed/labor force x 100
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Underemployment
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individuals who are employed in a job that is below their skills
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discouraged workers
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Individuals who have stopped looking for a job because they are convinced that they will not find a suitable one.
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labor force participation rate
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the percentage of adults in an economy who are either employed or who are unemployed and looking for a job
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calculate labor force participation rate
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total labor force/adult population x 100
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cyclical unemployment
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unemployment tied to swings in the business cycle
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frictional unemployment
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unemployment that occurs when people take time to find a job
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structural unemployment
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unemployment that occurs when workers' skills do not match the jobs that are available
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seasonal unemployment
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unemployment that occurs as a result of harvest schedules or vacations, or when industries slow or shut down for a season
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natural rate of unemployment
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the rate of unemployment due to structural and frictional forces in the economy; zero cyclical unemployment
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Inflation
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a general increase in prices
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index number
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a unit-free number derived from the price level over a number of years, which makes computing inflation rates easier
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base year
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arbitrary year whose value as an index number is defined as 100
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Calculate inflation rate
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Index year2- Index year1/ Index year1 X100
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Deflation
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a decrease in the general level of prices
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Hyperinflation
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A very rapid rise in the price level; an extremely high rate of inflation.
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indexed
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a price, wage, or interest rate is adjusted automatically for inflation
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Cost- of-Living adjustments COLAs
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a contractual provision that wage increases will keep up with inflation
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Adjustable Rate Mortgage (ARM)
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a type of loan a borrower uses to purchase a home in which the interest rate varies with market interest rates
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