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Macroeconomics
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the study of the economy as a whole. attempts to evaluate or summarize the performances of all markets simultaneously
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Microeconomics
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the study of decisions made by individuals, businesses, and other entities such as governments. often focuses on a single market
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Gross Domestic Product GDP
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the market value of all final goods and services produced in a country in a given year
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Consumption
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spending by households on goods and services
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Investment
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spending by businesses on final goods or services that will be used later to produce more goods and services
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Net Exports
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the sum of the goods produced domestically and sold abroad, minus the goods and services that were produced abroad and purchased domestically
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Nominal GDP
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a measure of a country's production of goods and services valued at current market prices
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Real GDP
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a measure of the output of final goods and services in a country, holding prices constant from year to year
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Economic Growth
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the increase in the overall value of goods and services produced in an economy across time; usually measured as the percentage increase in a country's real GDP or real GDP per capita
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Intermediate Goods
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raw materials or components that will eventually be transformed into a finished product
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Consumption
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a person buys a new set of sheets for his bed. that purchase is counted in the ___________ component of GDP
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GDP
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is the market value of all final goods and services produced in a country in a given year
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Net Exports
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are the sum of the goods produced in America and sold aboard, minus the goods and services that were produced aboard but purchased in America
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Investments
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include spending by businesses on factories, tools, and research and development
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Income Approach
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the _________ to calculating GDP adds up wages, rents, and profits to determine GDP
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Rents ; Profits ; Wages
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_______ are incomes earned by landlords, _______ are incomes earned by business owners, and _______ are incomes earned by workers
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Fixed Income
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expenditures on physical plants and equipment, which are then used to produce other goods
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Expenditure Approach
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adds up total spending on final goods and services made by the various types of spending units in order to compute GDP
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2008
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if an automobile is produced by Chevrolet in 2008 but is not sold until 2010, the automobile is included in which year's GDP?
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Investment
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building houses, or residential fixed investment, is a type of _______ expenditure
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US GDP stays the same, and French GDP increases
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when Josie, a US resident, buys an imported bottle of wine from France
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Real GDP
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measures the output of final goods in a country in a given year, valued at a particular base year's prices
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Real GDP Per Capita
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the best measure of a country's standard of living discussed in this chapter
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Nominal GDP
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GDP for a given year valued in that year's prices
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Nominal GDP increases, and real GDP is unchanged
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Supposed that between the years 2524 and 2525, US production remains unchanged, but prices increase by 6%. then _______ .
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Unemployment
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a situation that occurs when people who are willing and able to work cannot find jobs
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Unemployment Rate
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a measurement of the percentage of people in the labor force who are not working but are actively seeking work
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Labor Force Participation Rate
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a measurement of the percentage of the adult population that is in the labor force
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Underemployed
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performing work for which a person is overqualified
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Discouraged workers
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people who have given up actively seeking work after an extended period of unemployment
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Frictional Unemployment
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unemployment that exists because it can be difficult and time-consuming to match unemployed person to existing vacancies
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Structural Unemployment
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longer-term unemployment that exists when there are more people looking for work in some labor markets than there are jobs available, at the existing wage rate
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Natural Rate of Unemployment
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the sum of frictional and structural unemployment rates
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Full Employment
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a situation that occurs when unemployment is at a natural rate
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Cyclical Unemployment
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unemployment that is related to downturns in the economy during business cycles
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Wage Stickiness
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the inability of wages to adjust to market conditions
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Frictional Unemployment
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unemployment that exists because it takes time to match workers to jobs to which they are qualified
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Cyclical Unemployment
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unemployment that is related to a downturn in the economy during business cycles
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Frictional and Structural Unemployment
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the natural rate of unemployment is the sum of _______
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Structural Unemployment
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unemployment that exists when there are more people looking for work than there are jobs available at the existing wage rate
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The Business Cycle
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the ordinary fluctuation of real GDP around its long-run trend
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Natural Rate of Unemployment
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the economy is often said to be operating at full employment when unemployment is equal to _______
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Frictionally
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Dan recently reentered the labor force after 15 years at home raising his children. Unfortunately, he cannot find a job on his field, computer science, because his skills have deteriorated during his hiatus from the labor force. Dan is probably considered _______ unemployed.
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Externalities
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effects of a transaction, or an activity, that hurts or benefits people or parties that are not directly involved in that transaction or activity
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Excise Tax
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specific tax levied on the composition (or production) of a particular good or service
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Inelastic
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the quantity demanded will be constant even if there is a change in price
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Inelastic
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steep slope of supply curve
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Elastic
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change in price = change in demand
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Market Basket
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what average people or a typical household buy and in what quantities they buy them
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Base Year
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= 100
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Base Year
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a reference base period, to which prices in other years can be compared
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Consumer Price Index CPI
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a weighted average of the prices of all the items in a given basket of goods and services bought in a typical household
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CPI
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= Final Value - Initial Value
------------------------------------ x 100
Initial Value
------------------------------------ x 100
Initial Value
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Inflation Rate
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the percentage increase in the price level from one year to the next year
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Demand-Pull Inflation
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occurs when all or most sectors of the economy increase their demand for goods and services
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Cost-Push Inflation
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occurs as a result of increases in the cost of production
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Profit-Push Inflation
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occurs when businesses use market power to restrict output : push up prices and profits
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Nominal GDP
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GDP measured by using current prices
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Real GDP
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an inflation adjusted measure of NGDP, or GDP measured in constant price
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Economic Growth
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the annual percentage change of RGDP
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GDP Deflator
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the price index used to adjust GDP for inflation, including all goods rather than a market basket
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GDP Deflator
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= NGDP
---------- x 100
RGDP
---------- x 100
RGDP
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Computing Real GDP
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the value of the entire output produced annually within a country's borders, adjusted for price changes
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Labor Force
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all those in working-age population who are employed plus those who are unemployed and actively seeking employment
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Unemployment Rate
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percentage of people in the labor force who do not have jobs and are actively seeking enployment
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Unemployment Rate
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= Number of unemployed
----------------------------------- x 100
Labor force
----------------------------------- x 100
Labor force
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Underemployed
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the state of working significantly below skill level or working fewer hours than desired
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Discouraged Worker Effect
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when bad news induces people to stop looking for work causing the unemployment rate to fall
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Encouraged Worker Effect
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when good news induces people to start looking for work causing the unemployment rate to rise
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Cyclical Unemployment
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when people lose their jobs because of a temporary downturn in the economy
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Structural Unemployment
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when people lose their jobs because of changes in the economy that makes their particular skills obsoletes, in lesser demand - or not needed at all
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Frictional Unemployment
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when people are unemployed for a short time in the transition to another job or due to normal labor turnover
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Natural Unemployment Rate
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the unemployment rate when the economy is at full employment - that is when there is no cyclical unemployment, or equivalently, when all unemployment is frictional or structural
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Business Cycle
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periodic but irregular up-and-down movements in real GDP
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Business Cycle Phases
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trough
recovery
expansion
peak
recession
recovery
expansion
peak
recession
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Depression
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a severe recession
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Cost of Living
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the amount of money that must be spent to achieve a given standard of life
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Cost of Living
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the average amount of goods or services a company or individual can enjoy / have in a society or country
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