Chapter 12 Economics Gross Domestic Product and Growth

National income accounting

a system economists use to collect and organize macroeconomic statistics on production, income, investment, and savings

intermediate goods

products used in the production of final goods

real GDP per capita

real GDP divided by the total population of a country

aggregate demand

the amount of goods and services in the economy that will be purchased at all possible price levels

gross national product

the annual income earned by a nations firms and citizens

price level

the average of all prices in the economy

Gross domestic product (GDP)

the dollar value of all final goods and services produced within a country borders in a given year

peak

the height of an economic expansion, when real GDP stops rising

depreciation

the loss of the value of capital equipment that results from normal war and tear

trough

the lowest point of an economic contraction, when real GDP stops falling

savings rate

the portion of disposable income that is saved

capital deepening

the process of increasing the amount of capital per worker

aggregate supply

the total amount of goods and services in the economy available at all possible price levels

nondurable goods

those goods that last a short period of time, such as food, light bulbs, and sneakers

durable goods

those goods that last for relatively long time, such as refrigerators cars, and DVD players

real GDP

GDP expressed in constant or unchanging , prices

nominal GDP

GDP measured in current prices

stagflation

a decline in real GDP combined with a rise in the price level

contraction

a period of economic decline marked by falling real GDP

expansion

a period of economic growth as measured by a rise in real GDP

business cycle

a period of macroeconomic expansion followed by one of macroeconomic contraction

recession

a prolonged economic contraction

depression

a recession that is especially long and severe

leading indicators

a set of key economic variables that economists use to predict future trends in a business cycle

economic growth

a steady long-term increase in real GDP

technological progess

an increase in efficiency gained by producing more output without using more inputs

saving

income not used for consumption