Macroeconomics Ch 5, 6, 7

net business transfer payments

net transfer payments by businesses to others

disposable personal income or after-tax income

personal income minus personal income taxes - amount that households have to spend or save

sticky prices

prices that do not always adjust rapidly to maintain equality between quantity supplied and quantity demanded

corporate bonds

promissory notes issued by firms when they borrow money

treasury bonds

promissory notes issued by the federal government when it borrows money

indirect taxes minus subsidies

taxes such as sales taxes, custom duties, and license fees less subsidies that the government pays for which it receives no goods or services in return

depreciation

the amount by which an asset's value falls in a given period

changes in business inventories

the amount in which firms' inventories change during a period. Inventories are the goods that firms produce now but intend to sell later

personal saving

the amount of disposable income that is left after total personal spending in a given period

aggregate behavior

the behavior of all households and firms together

current dollars

the current prices that we pay for goods and services

business cycle

the cycle of short-term ups and downs in the economy

discouraged worker effect

the decline in the measured unemployment rate that results when people who want to work but cannot find jobs grow discouraged and stop looking, thus dropping out of the labor force

net exports (EX-IM)

the difference between experts and imports - can be positive of negative

real interest rate

the difference between the interest rate on a loan and the inflation rate

value added

the difference between the value of goods as they leave a stage of production and the cost of the goods as they entered that stage

corporate profits

the income of corporations

proprietors' income

the income of unincorporated businesses

rental income

the income received by property owners in the form of rent

net interest

the interest paid by business

labor force

the number of people employed plus the number of unemployed

informal economy

the part of the economy in which transactions take place and in which income is generated that is unreported and therefore not part of the GDP

personal saving rate

the percentage of disposable personal income that is saved

unemployment rate

the percentage of the labor force that is unemployed

expansion/boom

the period in a business cycle from a trough up to a peak during which output and employment grow

contraction/recession/slump

the period in the business cycle from a peak down to a trough during which employment and output fall

Great Depression

the period of severe economic contraction and high unemployment that began in 1929 and continued throughout the 1930's

fine-tuning

the phrase used by Walter Heller to refer to the government's role in regulating inflation and unemployment

dividends

the portion of a firm's profits that the firm pays out each period to its shareholders

structural unemployment

the portion of unemployment that is due to changes in the structure of the economy that result in a significant loss of jobs in certain industries

frictional unemployment

the portion of unemployment that is due to the normal turnover in the labor market; used to denote short-run job/skill-matching problems

labor force participation rate

the ratio of the labor force to the total population 16 years old and older

unemployment rate (ch 7)

the ratio of the number of people unemployed to the total number of people in the labor force

services

the things we buy that do not involve the production of physical things, such as legal and medical services and education

monetary policy

the tools used by the Federal Reserve to control the short-term interest rate

national income

the total income earned by the factors of production owned by a country's citizens

personal income

the total income of households

gross domestic product (GDP)

the total market value of all final goods and services produced within a given period by factors of production located within a country

gross national product (GNP)

the total market value of all final goods and services produced within a given period by factors of production owned by a country's citizens ~regardless of where the output is produced~

aggregate output

the total quantity of goods and services produced in an economy in a given period

gross investment

the total value of all newly produced capital goods (plant, equipment, housing, and inventory) produced in a given period

gross private domestic investment (I)

total investment in capital- that is, the purchase of new housing, plants, equipment and inventory by the private (nongovernment) sector

cyclical unemployment

unemployment that is above frictional plus structural unemployment

national income and product accounts

data collected and published by the government describing the various components of national income and output in the economy

statistical discrepancy

data measurement error

macroeconomics

deals with the economy as a whole - focuses on the determinants of total national income, deals with aggregates such as aggregate consumption and investment, and looks at the overall level of prices instead of individual prices

microeconomics

examines the functioning of individual industries and the behavior of individual decision-making units - firms and households

personal consumption expenditures (C)

expenditures by consumers on goods and services

government consumption and gross investment (G)

expenditures by federal, state, and local governments for final goods and services

nonresidential investment

expenditures by firms for machines, tools, plants, etc.

residential investment

expenditures by households and firms on new houses and apartments buildings

shares of stock

financial instruments that give to the holder a share in the firm's ownership and therefore the right to share in the firms' profits

circular flow

a diagram showing the income received and payments made by each sector of the economy

per-capita output growth

the growth rate of output per person in the economy

productivity growth

the growth rate of output per worker

output growth

the growth rate of the output of the entire economy

weight

the importance attached to an item within a group of items

natural rate of unemployment

the unemployment rate that occurs as a normal part of the functioning of the economy. sometimes taken as the sum of frictional and structural unemployment rates

base year

the year chosen for the weights in a fixed-weight procedure

participants in the economy (4)

1. households 2. firms 3. government 4. rest of the world

3 major concerns of macroeconomics

1. output growth 2. unemployment 3. inflation and deflation

Expenditure approach equation

C + I + G + (EX-IM) = GDP

nominal GDP

GDP measured in current dollars

gross national income (GNI)

GNP converted into dollars using an average of currency exchange rates over several years adjusted for inflation

recession

a period during which aggregate output declines, conventionally for a period of 2 consecutive quarters

hyperinflation

a period of very rapid increases in the overall price level

unemployed

a person 16 years old or older who is not working, is available for work, and has made specific efforts to ind work during the past 4 weeks

not in the labor force

a person who is not looking for work because he does not want a job or has given up looking

consumer price index

a price index computed each month by the Bureau of Labor Statistics using a bundle that is meant to represent the "market basket" purchased monthly by the typical urban consumer

fixed-weight procedure

a procedure that uses weights from a given base year

depression

a prolonged and deep recession

stagflation

a situation of both high inflation and high unemployment

final goods and services

goods and services produced for final use

intermediate goods

goods that are produced by one firm for use in further processing by another firm

nondurable goods

goods that are used up family quickly, such as food and clothing

durable goods

goods that last a relatively long time, such as cars and household appliances

fiscal policy

government policies concerning taxes and spending

net investment

gross investment minus depreciation

net national product (NNP)

gross national product minus depreciation; a nation's total product minus what is required to maintain the value of its capital stock

compensation of employees

includes wages, salaries, and various supplements (such as employer supplements to social insurance or pension funds) paid to households by firms and the government

surplus of government enterprises

income of government enterprises

Keynes

it is not prices and wages that determine the level of employment, it is the level of aggregate demand for goods and service

producer price indexes

measures of prices that producers receive for products at various stages in the production process

deflation

a decrease in the overall price level

expenditure approach

a method of computing GDP that measures the total amount spent on all final goods and services during a given period

income approach

a method of measuring GDP that measures the income - wages, rents, interest, and profits- received by all factors of production in producing final goods and services

inflation

an increase in the overall price level

employed

any person 16 years or older 1. who works for pay, either for someone else in his own business for 1 hour or more per week 2. who works without pay for 15 hours or more per week in a family enterprise 3. who has a job but has been temporarily absent with or without pay

transfer payments

cash payments made by the government to people who do not supply goods, services, or labor in exchange for these payments. they include Social Security benefits, veterans' benefits, welfare payments