AP Econ Vocab Macro Unit 1

M1

________ (money)- the money supply that is composed of currency, demand deposits, other liquid deposits- which includes savings deposits.

Recession

________: a period of economic downturn when output and unemployment are falling.

Bonds

________- a loan in the form of an IOU that pays interest.

Disinflation

\- the process of bringing the inflation rate down.

Hyperinflation

________- high and accelerating inflation.

Inflation rate

________ (with equation)- the percentage increase in the overall level of prices per year.

inflation Inflation

Unanticipated ________ being higher than expected.

Indexation

________ (with wages)- the process of adjusting the price of a financial instrument or contract (e.g., wages) to account for changes in the value of money over time.

Expenditures

________ approach to GDP: an approach to calculating GDP by adding up aggregate spending on domestically produced final goods and services in the economy- the sum of consumer spending, investment spending, government purchases of goods and services, and exports minus imports.

Business cycle

________- the alternation between economic downturns, known as recessions, and economic upturns known as expansions.

Gross Domestic Product

________- the total value of all final goods and services produced in the economy during a given year.

Monetary Policy

________- The central banks use of changes in the quantity of money or the interest rate to stabilize the economy.

Menu

________ costs- the real cost of changing listed prices.

Federal Reserve

The Act requires the ________ to conduct monetary policy pursuant to achieving these two goals, and to report to Congress on its conduct of monetary policy twice a year.

Capita

Per ________ (GDP): the sum of gross value added by all resident producers in the economy plus any product taxes (less subsidies) not included in the valuation of output, divided by mid- year population.

Consumer price index

________ (CPI)- measures the cost of the market basket of a typical urban american family.

Deflation

________- a falling overall price level.

Chain Linking

________ (of economic data)- the method of calculating changes in real GDP.

GDP

Value added (as an approach to ________)- A way of calculating ________ by surveying firms and adding their contributions to the value to final goods and services.

Circular flow diagram

________ (in economics)- an economic model that presents how money, goods, and services move between sectors in an economic system.

Humphrey

________- Hawkins Employment Act 1978- establishes price stability and full employment as national economic policy objectives.

Inventories

________ (as GDP component)- stocks of goods and raw materials held to facilitate business operations.

Imports

________- goods and services purchased from other countries.

Underemployment Workers

________ being overqualified or looking for more hours.

Peak

________ (Business cycle): the highest point between the end of an economic expansion and the start of a contraction in a business cycle.

Private savings

________: disposable income minus consumer spending, disposable income that is not spent on consumption but rather goes into financial markets.

Depression

________: a very deep and prolonged downturn.

Stagflation

________- Combination of inflation and stagnating (or falling) aggregate output.

Structural inflation inflation

________ relating to a government's monetary policy (microeconomics) rather than to supply of and demand for goods and services.

Full employment

________: where virtually all who are able and willing to work are employed.

Stocks A share of ownership of a business

________ held by the shareholder.

yield

________ curve- ________ of fixed- interest securities plotted against the length of time.

Government Transfers

________: payments that the government makes to individuals without expecting a good or service in return.

Shoe Leather Costs

________- Increased cost of a good due to inflation.

Real GDP

________- total value of all final goods and services produced in the economy during a given year, calculated using the prices of a selected base year in order to remove the effects of price changes.

price index

Producer ________ (PPI): measure the prices of the goods and services purchased by producers.

Nominal GDP

________- the total value of all final goods and services produced in the economy during a given year, calculated with the prices current in the year in which the output is produced.

Fiscal policy

________: the use of government purchases of goods and services, government transfers, or tax policy to stabilize the economy.

Exports

________: goods and services sold to other countries.

GDP deflator

________: hows how much a change in GDP relies on changes in the price level.

Inflation

________- a rising overall price level.

Unit of account costs

________- When inflation causes money a less credible source of measurement.

price level

Aggregate ________- a measure of the overall level of prices in the economy.

National income

________ and Product Accounts (aka National Accounts)- Keep track of the flows of money among different sectors of the economy; calculated by the Bureau of Economic Analysis.

Demand

________- pull inflation: inflation that is caused by an increase in aggregate demand.

Cyclical unemployment

________: the deviation of the actual rate of unemployment from the natural rate.

Financial markets

________: the markets (banking, stock, and bond) that channel private savings and foreign lending into investment spending, government borrowing, and foreign borrowing.

Price stability

________: when the overall price level is changing only slowly if at all.

Net Exports

________ (v. exports): the difference between value of exports and the value.

inflation inflation

Cost- push ________ that is caused by a significant increase in the price of a n input with economy wide importance.

Real GDP

total value of all final goods and services produced in the economy during a given year, calculated using the prices of a selected base year in order to remove the effects of price changes

Gross National Product (GNP)

the total value of goods and services provided by a country during one year, equal to the gross domestic product plus the net income from foreign investments

Humphrey

Hawkins Employment Act 1978- establishes price stability and full employment as national economic policy objectives

Cyclical unemployment

the deviation of the actual rate of unemployment from the natural rate

demand-pull inflation

inflation that is caused by an increase in aggregate demand

Depression

a very deep and prolonged downturn

Discouraged workers

non working people who are capable of working but have given up looking for a job due to that state of the job market

Disposable income

income plus government transfers minus taxes; the total amount of household income available to spend on consumption and to save

Employment act 1946

the basic goal of the act was to provide work to those seeking it and maximize production and purchasing power

expenditures approach to GDP

an approach to calculating GDP by adding up aggregate spending on domestically produced final goods and services in the economy-the sum of consumer spending, investment spending, government purchases of goods and services, and exports minus imports

Exports

goods and services sold to other countries

Financial markets

the markets(banking, stock, and bond) that channel private savings and foreign lending into investment spending, government borrowing, and foreign borrowing

Fiscal policy

the use of government purchases of goods and services, government transfers, or tax policy to stabilize the economy

Frictional unemployment

unemployment due to the time workers spend in job search

Full employment

where virtually all who are able and willing to work are employed

Government Transfers

payments that the government makes to individuals without expecting a good or service in return

GDP deflator

hows how much a change in GDP relies on changes in the price level

value added (as an approach to gdp)

A way of calculating GDP by surveying firms and adding their contributions to the value to final goods and services

Natural rate of unemployment (also NAIRU)

the unemployment rate that arise from the effects of frictional plus structural unemployment

Net Exports (v. exports)

the difference between value of exports and the value

Peak (Business cycle)

the highest point between the end of an economic expansion and the start of a contraction in a business cycle

Per Capita (GDP)

the sum of gross value added by all resident producers in the economy plus any product taxes (less subsidies) not included in the valuation of output, divided by mid-year population

Price index

measures the cost of purchasing a given market basket in a given year, the index value is normalize so that it is equal to 100 in the selected base year

Price stability

when the overall price level is changing only slowly if at all

Private savings

disposable income minus consumer spending, disposable income that is not spent on consumption but rather goes into financial markets

Producer price index (PPI)

measure the prices of the goods and services purchased by producers

Real (v. nominal) (as general terms)

The real value is the nominal value after it has been adjusted for inflation

Real GDP growth rate

total value of all financial goods and services produced in an economy in a given year, calculated by using the prices of a selected base year in order to remove the affects of price changes

Real wage/nominal wage

the wage divided by the price level to adjust for the effects of inflation or deflation

Recession

a period of economic downturn when output and unemployment are falling

Aggregate output

the economys total production of goods and services for a given period of time

Aggregate price level

a measure of the overall level of prices in the economy

Bonds

a loan in the form of an IOU that pays interest