Chapter 11 Vocabulary

Transfer payment

A government payment to persons not in exchange for goods or services produced

Circular flow model

A model that shows the exchange of money, products, and resources between businesses, households, and government

Economic growth

An increase in a nation's real GDP

Expansion

An upturn in the business cycle during which real GDP rises

Real GDP

GDP adjusted for changes in prices over time

GDP per capita

GDP divided by the total population

Nominal GDP

GDP measured in current prices

Final goods

Goods and services sold to the final user

Intermediate goods

Goods and services used as inputs for the production of final goods

Lagging indicators

Key variables that change after real GDP changes

Coincident indicators

Key variables that change at the same time that real GDP changes

Leading indicators

Key variables that change before real GDP changes

Business cycle

The alternating periods of economic growth and contraction measured by changes in real gross domestic product

Recession

The downturn in the business cycle during which Real GDP declines. Also called a contraction

Gross domestic product

The market value of all final goods and services produced annually in a country

Trough

The phase of the business cycle in which real GDP reaches its lowest point after falling during a recession

Peak

The phase of the business cycle in which real GDP reaches its maximum after rising during a recovery