Macroeconomics Exam 2 Chapter 5-8
Okun law
1% more unemployment results in 2 percent less output
Disposable income
After-tax income of households; personal income less personal taxes.
investment
Expenditures on (production of) new plant, equipment, and structures (capital) in a given time period, plus changes in business inventories.
Net domestic product
GDP less depreciation
Business cycle
Alternating periods of economic expansion and economic recession
Cost of living adjustment
Automatic adjustments of nominal income to the rate of inflation
Frictional unemployment
Brief periods of unemployment experienced by people moving between jobs or into the labor market
Labor Force participation rate
The percentage of the working-age population that is working or seeking employment
Gross Domestic Product
The total value of goods and services produced within the borders of a country during a specific time period, usually one year.
Recession
a decline in total output (real GDP) for two or more consecutive quarters
deflation
a decrease in the general level of prices
Adjustable rate mortgage
a mortgage that adjusts the nominal interest rate to changing rates of inflation
Growth Recession
a period during which real GDP grows, but at a rate below the long-term trend of 3 percent
GDP deflator
a price index that refers to all goods and services included in GDP
Labor force
all persons age 16 and over who are either working for pay or actively seeking paid employment
Core inflation rate
changes in the CPI, excluding food and energy prices
Laissex faire
doctrine of "leave it alone" of nonintervention by government in the market mechanism
Import
goods and services purchased from internation source
Export
goods and services sold to international buyers
Intermediate Goods
goods or services purchased for use as input in the production of final goods or in services
Natural Rate of unemployment
long-term rate of unemployment determined by structural forces in labor and product markets
Consumer price index
measure of change in price over time of specific group of goods and services
Law of demand
quantity of a good demanded in a given time period increases as its price falls, ceteris paribus
Say's law
supply creates its own demand
Saving
that part of disposable income not spent on current consumption; disposable income less consumption
Price stability
the absence of significant changes in the average price level; officially defined as a rate of inflation of less than 3 percent
Production possibilities
the alternative combination of final goods and services that could be produced in a given time period with all available resources and technology
production possibilities
the alternative combinations of final goods and services that could be produced in a given time period with all available resources and technology
Nominal income
the amount of money income received in a given time period, measured in current dollars
Inflation rate
the annual percentage rate of increase in the average price level
Equilibrium (macro)
the combination of price level and real output that is compatible with both aggregate demand aggregate supply
Depreciation
the consumption of capital in the production process; the wearing out of plant and equipment
Unemployment
the inability of labor force participants to find jobs
Value Added
the increase in the market value of a product that takes place at each stage of the production process
Full employment
the lowest rate of unemployment compatible with price stability, variously estimated at between 4 and 6 percent unemployment
National Income Accounting
the measurement of aggregate economic activity, particularly national income and its components
Bracket creep
the movement of taxpayers into higher tax brackets (rates) as nominal incomes grow
real interest rate
the nominal interest rate minus the inflation rate
Item Weight
the percentage of total expenditure spent on a specific product; used to compute inflation index
relative price
the price of one good in comparison with the price of other goods
Unemployment rate
the proportion of the labor force that is unemployed
Inflationary flashpoint
the rate of output at which inflationary pressures intensify; the point on the AS curve where slope increases sharply
Outsourcing
the relocation of production to foreign countries
Macroeconomics
the study of aggregate economic behavior, of the economy as a whole
Full employment GDp
the total market value of final goods and services that could be produced in a given time period at full employment; potential GDP
Money illusion
the use of nominal dollars rather than real dollars to gauge changes in one's income or wealth
Net export
the value of exports minus the value of imports
Real GDP
the value of final output produced in a given period, adjusted for changing prices
Nominal GDP
the value of final output produced in a given period, measured in the prices of that period (current prices)
nominal GDP
the value of final output produced in a given period, measured in the prices of that period (current prices)
Base Year
the year used for comparative analysis; the basis for indexing price changes
Base year
the year used for comparative analysis; the basis for indexing price changes
GDP per capita
total GDP divided by total population; average GDP
National income
total income earned by current factors of production: GDP less depreciation, plus net foreign factor income
Gross investment
total investment expenditure in a given time period
Aggregate demand
total quantity of output (real GDP) demanded at alternative price levels in a given time period, ceteris paribus
Aggregate supplu
total quantity of output (real GDP) produces are willing and able to supply at alternative prices levels in a given time period, ceteris paribus
Cyclical unemployment
unemployment attributable to a lack of job vacancies, that is, to an inadequate level of aggregate demand
Structural unemployment
unemployment caused by a mismatch between the skills (or location) of job seekers and the requirements (or location) of available jobs
Seasonal unemployment
unemployment due to seasonal changes in employment or labor supply
Hyperinflation
Inflation rate in excess of 200 percent, lasting at least one year
Net investment
gross investment less depreciation
real income
income in constant dollars; nominal income adjusted for inflation
Personal income
income received by households before payment of personal taxes
Inflation
increase in average level of prices of goods and service
Discouraged worker
individual who isn't actively seeking employment but would look for or accept a job if one were available
Underemployment
people seeking full-time paid employment who work only part-time or are employed at jobs below their capability