Untitled Flashcards Set

Macroeconomics

The branch of economics that focuses on the aggregate outcomes in the economy and the goals of economic stability, growth, and employment.

GDP (Gross Domestic Product)

The total value of all goods and services produced by a country within a year, serving as an indicator of the country's economic activity and size.

Unemployment Rate

The percentage of the working population that is unemployed and actively seeking work.

Inflation Rate

The annual increase in the consumer price index (CPI), which compares the costs of a set basket of goods over time.

Budget Surplus

Occurs when tax revenue exceeds government expenditures.

Budget Deficit

Occurs when government spending surpasses tax revenue.

Net Exports

The value of a country's exports minus its imports, determining trade balance.

Trade Surplus

A situation where a country's exports exceed its imports.

Trade Deficit

A situation where a country's imports exceed its exports.

Real GDP

GDP that has been adjusted for inflation, calculated using the formula: Real GDP = Nominal GDP × Price Index / 100.

Nominal GDP

The economic statistic announced at present without any adjustments for inflation.

Aggregate Production Function

A theoretical model that shows how inputs like human and physical capital lead to outputs, measured as GDP per capita.

Economic Convergence

The phenomenon where economies with lower per capita income tend to grow at a faster rate than those with higher per capita income.

Hidden Unemployment

Includes underemployed individuals and discouraged workers not actively seeking work.

CPI (Consumer Price Index)

A measurement that examines the average change over time in the prices paid by consumers for a basket of goods and services.

Substitution Bias

A limitation of CPI that may overstate the changes in the cost of living due to a failure to account for consumer substitutions between goods.

Quality Bias

A limitation of CPI that does not account for improvements in product quality over time.

Trade Balances

The difference between a country's exports and imports, crucial for evaluating a country's economic health.