AP Macroeconomics Unit 2 Vocabulary

For Mr. Howland's AP Econ at Highland Park High School

Aggregate Expenditures/Spending

Aggregate Expenditures/Spending

Sum of all expenditures undertaken in the economy by the factors

Aggregate Output

Sum of all goods and services produced in an economy

Aggregate Price Level

A measure of the overall level of prices in the economy, also called Price Index

Base Year

The year upon which inflationary calculations are compared to, and provides a measure of how economic trends have changed from this year to the given year

Bond

A bond is a fixed-income instrument that represents a loan made by an investor to a borrower, typically corporate or governmental

Chain-Linking

A method of estimating statistics for different years at constant prices

Consumer Price Index

A measure of the change in prices paid by U.S. Consumers for a market basket representative of aggregate U.S. consumer spending

Consumer Spending/Personal Consumption Expenditures

The total money spent on final goods and services by individuals and households for personal use and enjoyment in an economy

Consumption of Fixed Capital (Depreciation)

a reduction in the value of an asset with the passage of time

Cyclical Unemployment

The component of overall unemployment that results directly from cycles of economic upturn and downturn, typically rising during recessions

Discouraged Workers

A discouraged worker is a person who is eligible for employment and can work, but who is currently unemployed and has not attempted to find employment in the last four weeks

Disinflation

A slowing of the pace of price inflation, such as a decline from 10% to 5% inflation

Disposable Income

The amount of money that an individual or household has to spend or save after taxes have been deducted

Efficiency Wages

A level of wages paid to workers above the minimum wage to retain a skilled and efficient workforce

Employed

The state of having a paid job

Expenditures Approach

System for calculating gross domestic product (GDP) that combines consumption, investment, government spending, and net exports

Exports

Goods and services that are produced in one country and sold to buyers in another

Factor Markets

All of the resources that businesses use to purchase, rent, or hire what they need in order to produce goods or services

Final Goods and Services

The end product a business produces that is purchased by a consumer

Financial Markets

Any place or system that provides buyers and sellers the means to trade financial instruments, including bonds, equities, the various international currencies, and derivatives

Firm

Organizations that produce goods and services, also called a Business or Producer

Frictional (Job Search) Unemployment

Voluntary employment transitions such as leaving one’s job for better pay, different work place, etc. with the intention of soon taking a new job

GDP Deflator

Measures the changes in prices for all the goods and services produced in an economy, GDP Deflator = (nominal GDP / real GDP ) x 100

GDP Per Capita

An economic metric that breaks down a country's economic output per person, calculated by dividing a nation’s GDP by its population

Government Borrowing

A transferring of funds from a lender to the government, in exchange for securities from said government

Government Purchases (Of Goods and Services)

Expenditures on goods and services by federal, state, and local governments

Government Transfers

A redistribution of wealth by means of the government making a payment, without goods or services being exchanged

Gross Domestic Product

Tgrosshe total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period

Gross National Product

An estimate of the total value of all the final products and services turned out in a given period by the means of production owned by a country's residents

Gross Private Domestic Investment

The measure of physical investment used in computing GDP in the measurement of nations' economic activity.

Household

Also known as consumers

Hyperinflation

Rapid, excessive, and out-of-control general price increases in an economy, typically inflation measuring more than 50% a month

Imports

A good or service bought in one country that was produced in another

Income Approach

A method of calculating GDP based on the principle that all expenditures in an economy should equal the total income generated by the production of all that economy's goods and services

Inflation

A decrease in the purchasing power of money, an increase in prices of goods and services

Intermediate Goods and Services

A product used to produce a final good or finished product

Inventory

The raw materials used to produce goods as well as the goods that are available for sale

Labor Force

The sum of employed and unemployed (but willing and able) persons

Labor Force Participation Rate

The percentage of a population that is engaging in the labor force, calculated by diving the total labor force by the total population

Marginally Attached Workers

People who have not looked for employment in the last four weeks, but are willing and able to work; Discouraged workers are MAW, but not all MAW are discouraged

Market Basket

A subset a products or financial securities designed to mimic the performance of a specific market segment

Menu Costs

A cost incurred by firms when they change their prices, and therefore need to change elements of their firm to adapt

National Income (Product Accounts/National Accounts)

A set of economic accounts that provides detailed measures of the value and composition of national output and the incomes generated in the production of that output

Natural Rate of Unemployment

The minimum unemployment rate resulting from real or voluntary economic forces, also a ‘potential’ rate

Net Exports

The value of a nation’s total exports minus the value of its total imports

Nominal GDP

A value of all finished goods and services produced by a country at their current market prices

Nonmarket Transaction

Exchanges of goods or services that do not involve money or the traditional market system

Okun’s Law

A principle stating that a 1% increase in unemployment, or difference between nominal and real UE, indicates a 2% decline in GDP

Price Index

A measure of change of time of prices

Producer Price Index

A measure of change in the prices received by domestic producers

Product Markets

The marketplace where final goods or services are sold to businesses and the public sector

Real GDP

A value of the goods and services produced in the US, adjusted for inflationary pressures

Real Income

How much money an individual or entity makes after adjusting for inflation

Real Wage

The amount of money someone makes in one paycheck, adjusted for inflation

Recession

A decline in economic activity, lasting more than a ‘few months’

Recovery

The business cycle stage following a recession that is characterized by a sustained period of improving business

Seasonal Unemployment

Unemployment resulting from the decreased demand for jobs in certain parts of the year

Shoe Leather Costs

Costs that people incur to minimize their cash holdings during times of high inflation

Stock

Goods or merchandise kept on the premises of a business or warehouse and available for sale or distribution; Capital raised by a business or corporation through the issue and subscription of shares

Structural Unemployment

Longer-lasting form of unemployment caused by fundamental shifts in an economy and exacerbated by extraneous factors such as technology, competition, and government policy

Transfer Payments

A payment of money, usually from the government, for which there are no goods or services exchanged

Underemployed

A measure of the total number of people in an economy who are unwillingly working in low-skill and low-paying jobs or only part-time because they cannot get full-time jobs that use their skills

Unemployed

The state of not having a job, but being willing and able to undertake one

Unemployment Rate

A percentage of the total labor force that is unemployed but actively seeking work

Value Added Approach

Calculating an industry or sector's output and subtracting its intermediate consumption (the goods and services used to produce the output) to derive its value added