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GDP
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The market value off all final gods and services produced within a country in a given period of time
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net exports
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exports - imports
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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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government purchases
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spending on goods and services by local, state, and federal governments
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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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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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nominal GDP
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the production of goods and services valued at current prices
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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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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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core inflation
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a measure of the underlying trend of inflation
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Indexed
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the automatic correction of a dollar amount for the effects of inflation of law or contract
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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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real interest rate
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the interest rate corrected 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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physical capital
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the stock of equipment and structures that are used to produce goods and services
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technological knowledge
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society's understanding of the best ways to produce goods and services
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human capital
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the knowledge and skills that workers acquire through education, training, and experience
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diminishing returns
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the property whereby the benefit from an extra unit of an input declines as the quantity of the input increases
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natural resources
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the inputs into the production of goods and services that are provided by nature, such as land, rivers, and mineral deposits
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catch-up effect
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the property whereby countries that start off poor tend to grow more rapidly than countries that start off rich
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financial system
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the group of institutions in the economy that help to match one person's saving with another person's investment
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financial markets
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financial institutions through which savers can directly provide funds to borrowers
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stock
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a claim to partial ownership in a firm
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bond
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a certificate of indebtedness
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financial intermediaries
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financial institutions through which savers can indirectly provide funds to borrowers
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mutual fund
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an institution that sells shares to the public and uses the proceeds to buy a portfolio of stocks and bonds
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private saving
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the income that households have left after paying for taxes and consumption
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national saving (saving)
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the total income in the economy that remains after paying for consumption and government purchases
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budget surplus
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an excess of tax revenue over government spending
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public saving
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the tax revenue that the government has left after paying for its spending
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government debt
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the sum of all past budget deficits and surpluses
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budget deficit
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a shortfall of tax revenue from government spending
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market for loanable funds
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the market in which those who want to save supply funds and those who want to borrow to invest demand funds
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government net debt
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the difference between the value of government financial liabilities and financial assets
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virtuous circle
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Cycle that results when surpluses increase the supply of loanable funds, reduce interest rates, stimulate investment, and result in faster economic growth; faster growth leads to higher tax revenue and lower spending on income-support programs, and the result can be even higher budget surpluses
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crowding out
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a decrease in investment that results from government borrowing
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vicious circle
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results when deficits reduce the supple of funds, increases interest rates and discourages investments, results in slower economic growth, results can even be higher budget deficits
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labour force
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people aged 15 and over who are either employed or unemployed
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Labour force participation rate
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the percentage of the adult population that is in the labour force
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unemployment rate
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the percentage of the labor force that is unemployed
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frictional unemployment
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unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills
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cyclical unemployment
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unemployment caused by a business cycle recession
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discourages searchers
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individuals who would like to work but have given up looking for a job
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natural rate of unemployment
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the rate of unemployment to which the economy tends to return in the long run
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job search
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the process by which workers find appropriate jobs given their tastes and skills
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structural unemployment
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unemployment that results because the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one
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Employment Insurance
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a government program that partially protects workers' incomes when they become unemployed
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union
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A worker association that bargains with employers over wages, benefits, and working conditions
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strike
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the organized withdrawal of labour from a firm by a union
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collective bargaining
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the process by which unions and firms agree on the terms of employment
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efficiency wages
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above-equilibrium wages paid by firms to increase worker productivity
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