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