Macroeconomics Notes: National Income & Product Accounts, GDP, Unemployment & Inflation Concepts

Vocabulary flashcards covering key macroeconomic concepts from the lecture notes.

National Income and Product Accounts (National Accounts)

A system used to measure the total economic activity of a country, including GDP and related statistics.

Product Markets

Markets where goods and services are bought and sold.

Consumer Spending

The total amount of money spent by households on goods and services.

Factor Markets

Markets where the factors of production (land, labor, capital, and entrepreneurship) are bought and sold.

Government Spending

The total expenditure by government on goods and services.

Taxes

Payments made by individuals or businesses to the government to fund public services.

Tax Revenue

The income that the government receives from taxation.

Disposable Income

The amount of income households have left after paying taxes, available for spending or saving.

Government Transfers

Payments made by the government to individuals, such as Social Security or unemployment benefits.

Private Savings

The portion of income that households save rather than spend on consumption.

Financial Markets

Markets where financial securities, such as stocks and bonds, are bought and sold.

Government Borrowing

When the government borrows money, typically through issuing bonds, to cover budget deficits.

Investment Spending

Expenditure on capital goods like machinery and infrastructure that will be used for future production.

Inventories

Stocks of unsold goods held by businesses for future sale or use.

Exports

Goods and services produced domestically and sold to other countries.

GDP (Gross Domestic Product)

The total monetary value of all final goods and services produced within a country in a specific period.

Expenditure Approach

A method of calculating GDP by adding total expenditures on final goods and services in an economy.

Aggregate Spending

The total spending in an economy on goods and services, including consumption, investment, government spending, and net exports.

Income Approach

A method of calculating GDP by adding up all the incomes earned in the production of goods and services.

Value-Added Approach

A method of calculating GDP by adding the value added at each stage of production.

Final Goods and Services

Goods and services purchased for final use, not for resale or further production.

Intermediate Goods and Services

Goods and services used in the production of final goods and services.

Net Exports

The difference between a country’s exports and imports (Exports - Imports).

Value Added

The difference between the price of a good and the cost of the materials and labor required to produce it.

Nonmarket Transactions

Economic activities that do not involve market exchanges, such as household labor.

Employed

Individuals who are currently working or temporarily absent from their jobs.

Unemployed

Individuals who are actively seeking work but are not currently employed.

Labor Force

The total number of workers, both employed and unemployed, in an economy.

Labor Force Participation Rate

The percentage of the working-age population (16+) that is either employed or actively seeking employment.

Unemployment Rate

The percentage of the labor force that is unemployed and actively seeking work.

Discouraged Workers

Individuals who are willing and able to work but have stopped looking for employment due to a lack of opportunities.

Underemployed

Individuals working in jobs that are part-time when they desire full-time work or are overqualified.

Frictional Unemployment

Unemployment that occurs when workers are between jobs or entering the labor force for the first time.

Structural Unemployment

Unemployment caused by changes in the economy that alter the structure of industries or technology, making certain jobs obsolete.

Natural Rate of Unemployment

The rate of unemployment that occurs due to frictional and structural factors, even when the economy is at full employment.

Cyclical Unemployment

Unemployment that occurs during economic downturns when demand for goods and services decreases.

Inflation

The rate at which the general level of prices for goods and services is rising and purchasing power is eroded.

Deflation

A decrease in the general price level of goods and services.

Price Stability

A situation in which prices in an economy do not fluctuate significantly over time.

Real Wage

Wages adjusted for inflation, reflecting the purchasing power of the income.

Real Income

Income adjusted for inflation, representing the actual purchasing power of an individual's income.

Inflation Rate

The percentage change in the price level of goods and services over a period, typically a year.

Aggregate Price Level

The overall level of prices in an economy, measured by price indices like the CPI or GDP deflator.

Market Basket

A representative collection of goods and services used to calculate price indices like the CPI.

Base Year

A reference year used for comparison in price index calculations.

Price Index

A measure used to compare the relative price level of a market basket of goods over time.

CPI (Consumer Price Index)

Measures the average change over time in the prices paid by urban consumers for a market basket of goods and services.

Substitution Bias

The tendency for the CPI to overstate inflation by not fully accounting for changes in consumer behavior in response to price changes.

PPI (Producer Price Index)

A price index that measures the average change over time in the prices received by domestic producers for their output.

Shoe Leather Cost

The cost of time and effort people spend to reduce cash holdings during high inflation.

Menu Cost

The costs to adjust prices, such as printing new menus or updating price tags.

Nominal Interest Rate

The interest rate expressed in monetary terms, not adjusted for inflation.

Real Interest Rate

The interest rate adjusted for inflation, reflecting the true cost of borrowing.

Disinflation

A reduction in the rate of inflation, indicating a slowing of price increases.

Aggregate Output

The total quantity of goods and services produced in an economy.

Real GDP

The total value of all final goods and services produced within a country, adjusted for inflation.

Nominal GDP

The total value of all final goods and services produced within a country, measured at current market prices without adjusting for inflation.

GDP Deflator

A price index that adjusts nominal GDP to real GDP, accounting for inflation.

GDP per Capita

A measure of a country's economic output that accounts for its population size.

Business Cycle

The natural upturns (expansions) and downturns (recessions) of economic activity over time.

Recession

A period of economic decline typically defined as two consecutive quarters of negative GDP growth.

Trough

The lowest point in the business cycle, where economic activity bottoms out before recovering.

Expansion

A phase of the business cycle where the economy is growing, with increasing output and employment.

Peak

The highest point in the business cycle, signaling a transition from expansion to contraction.

Depression

A prolonged and severe recession characterized by high unemployment and widespread economic hardship.

Economic Growth

The increase in the production of goods and services in an economy over time, often measured by GDP growth.

Full-employment Level of Output

The level of output where all available resources, particularly labor, are being fully utilized, with no unemployment.

Potential Output

The maximum output an economy can produce without generating inflationary pressures, considering the available resources (natural unemployment included).

Output Gap

The difference between actual output and potential output, indicating whether an economy is underperforming or overheating.