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Investment
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the purchase of new plants, new equitment, new buildings, new residences and net addditions to inventories.
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economy
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the structure of economic activity in a community, a region, a country, a group of countries, or the world
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GDP
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the market value of all final goods and services producted in the nation during a given period, usually a year.
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consumption
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Household purchases of final goods and services, except for new residences, which count as investment.
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Government purchases
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spending on goods and services by all levels of government
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net exports
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the value of a country's exports minus the value of its imports
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aggregate expenditure
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total spending on all final goods and services produced in the economy during the year
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aggregate income
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the sum of all income earned by resource suppliers in the economy during the year
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depreciation
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the value of capital stock that is used up or becomes obsolete in producing GDP during the year
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nominal GDP
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the economy's aggregate output based on prices at the time of the transaction; current dollar GDP.
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real GDP
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the economy's aggregate output measured in dollars of constant purchasing power; GDP measured in terms of the goods and services produced
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consumer price index
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Measure of inflation based on the cost of a fixed "market basket" of goods and services purchased by a typical family
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business cycle
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fluctuation reflecting the rise and fall of economic activity relative to the long-term growth trend of the economy
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recession
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a decline in total production lasting at least two consecutive quarters, or at least six months
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expansion
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the phase of economic activity during which the economy's total output increases
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leading economic indicators
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measures that usually predict, or lead to, recessions or expansions
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aggregate output
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a composite measure of all final goods and services produced in an economy during a given period; real GDP
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aggregate demand
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the relationship between the average price of aggregate output and the quantity of aggregate output demanded, with other things constant.
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price level
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a composite measure reflecting the prices of all goods and services in the economy relative to prices in a base year
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aggregate demand curve
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a curve representing the relationship between the economy's price level and real GDP demanded per period, other things constant.
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aggregate supply curve
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a curve representing the relationship between the economy's price level and real GDP supplied per period, other things constant
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standard of living
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an economy's level of prosperity; best measured by the value of goods and services produced on average, per person
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productivity
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compares total output to a specific measure of input; usually reflects an average, such as bushels of grain per acre of farmland
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labor productivity
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output per unit of labor; measured as total output divided by the hours of labor employed to produce that output
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human capital
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the accumulated knowledge, skill, and experience of the labor force
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physical capital
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machines, buildings, roads, modes of transportation, and other manufactured creations used to produce goods and services
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capital deepening
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an increase in the quantity and quality of capital per worker; one source of rising labor productivity.
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rules of the game
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The formal and informal institutions that provide production incentives and promote economic activity, such as laws, customs, and conventions
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industrial market countries
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the advanced market economies of Western Europe, North America, Australia, New Zealand, and Japan ; also called developed countries
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developing countries
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countries with a lower living standard because of less human and physical capital per worker
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Group of Seven (G-7)
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The seven leading industrial market economies, including the United States, United Kingdom, France, Germany, Italy, Japan and Canada.
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basic research
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The search for knowledge without regard to how that knowledge will be used
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applied research
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research that seeks answers to particular questions or applies scientific discoveries to develop scientific products.
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industrial policy
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the view that government- using taxes, subsidies, and regulations- should nurture the industries and technologies of the future, thereby giving domestic industries an advantage over foreign competition
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cluster
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firms in the same industry or inrelated industries that group together in a region
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full employment
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occurs when there is no cyclical unemployment; relatively low unemployment
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Underemployment
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workers are overqualified for their jobs or work fewer hours than they would prefer
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labor force
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those in the adult population who are either working or looking for work
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unemployment rate
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the number of people without jobs who are looking for work divided by the number in the labor force.
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labor force participation rate
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the number in the labor force divided by the adult population
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unemployment benefits
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cash transfers to unemployed workers who lost their jobs, actively seek work, and meet other qualifications
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inflation
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an increase in the economy's price level
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demand-pull inflation
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inflation resulting from a rightward shift of the aggregate demand curve; greater demand pulls up the price level.
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cost-push inflation
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inflation resulting from a leftward shift or the aggregate supply curve; reduced supply pushes up the price level.
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nominal interest rate
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the interest rate expressed in current dollars as a percentage of the amount loaned; the interest rate on the loan agreement
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real interest rate
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the interest rate expressed in dollars of constant purchasing power as a percentage of the amount loaned; the nominal interest rate minus the inflation rate
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Laissez-faire
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the doctrine that government should not interfere in a market economy beyond the minimum required to maintain peace and property rights
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demand-side economics
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macroeconomic policy that focuses on shifting the aggregate demand curve as a way of promoting full employment and price stability
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stagflation
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a decline, or stagnation, of a nation's output accompanied by a rise, or inflation, in the price level
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supply-side economics
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macroeconomic policy that focuses on a rightward shift of the aggregate supply curve through tax cuts or other changes that increase production incentives
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cycle of poverty
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children in welfare families may end up on welfare themselves when they grow up
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welfare reform
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an overhaul of the welfare system in 1996 that imposed a lifetime welfare limit of five years per recipient and other conditions
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