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Gross Domestic Product (GDP)
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The total value of all final goods and services produced in a particular economy; the dollar value of all final goods and services produced within a county's borders in a given year.
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Durable Goods
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Goods that last for a relatively long time, such as refrigerators, cars, and DVD players.
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Nondurable Goods
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Goods that last a short period of time, such as food, light bulbs, and sneakers.
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Nominal GDP
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Gross Domestic Product measured in current (today's) prices. GDP that has NOT been corrected for inflation.
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Real GDP
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Gross Domestic Product expressed in constant, or unchanging, prices. GDP adjusted for price changes (i.e., adjusted for inflation)
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Depreciation
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The loss of the value of capital equipment that results from normal wear and tear. Any decrease or loss in value caused by age, wear, or market condition.
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Price Level
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The average of all prices of all goods and services in the economy.
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Recession
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A prolonged economic contraction. Real GDP has decreased for at least six months in a row. Characterized by high unemployment.
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Depression
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A recession that is especially long and severe, like the Great Depression in the 1930's. Unemployment is especially high.
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Economic Growth
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A steady, long-term increase in real GDP.
Expansion of the economy to produce more goods, jobs, and wealth.
Expansion of the economy to produce more goods, jobs, and wealth.
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Stagflation
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A decline in real GDP combined with a rise in the price level. So high unemployment and high inflation. "stagnant economic growth + inflation = stagflation." The US economy in the 1970's and early 1980's suffered from stagflation.
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Leading Indicators
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Key economic variables that economists use to predict a new phase of the business cycle.
These usually change before the economy as a whole changes and are useful as short term predictors of the economy.
These usually change before the economy as a whole changes and are useful as short term predictors of the economy.
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Real GDP per capita
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Real Gross Domestic Product divided by a total population of a country. The best measure of a nation's standard of living and typically used as a comparison
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Exports
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A good that is sent to another country for sale. So U.S. goods and services that we sell to the rest of the world.
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Imports
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A good that is brought in from another country for sale. So what Americans buy from other nations.
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Net Exports = Exports - Imports
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The value of a nation's exports minus the value of its imports; also called the trade balance.
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Intermediate Goods
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Goods used in the production of final goods and services. They are the components/parts of final goods and services. Materials or resources that will be transformed into another form or used for another product
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Aggregate Demand
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The amount of goods and services in the economy that will be purchased at all possible price levels.
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Aggregate Supply
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The total amount of goods and services in the economy available at all possible price levels.
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Business Cycle
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A period of macroeconomic expansion followed by a period of contraction. The "ups and downs of real GDP."
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Peak
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The height of an economic expansion, when real GDP stops rising.
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Expansion
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A period of economic growth as measured by a rise in real GDP. Also known as the "recovery" phase of the business cycle.
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Contraction
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A period of economics decline marked by falling real GDP. If real GDP declines for at least six months in a row, then the contraction is officially called a recession.
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Trough
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The lowest point in an economic contraction, when real gross domestic product stops falling. The lowest point on the business cycle.
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Trade Surplus (Exports > Imports)
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The result of a nation exporting more than it imports.
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Trade Deficit (Imports > Exports)
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The result of a country importing more than it exports. The USA has a trade deficit.
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