AP Macro Unit 1 Vocab

Gross Domestic Product (GDP)

Gross Domestic Product (GDP)

The market value of all final goods and services produced within a country in a given period.

Real GDP

The value of the goods and services produced in a specific period, adjusted for price changes caused by inflation, recession, or other factors.

Nominal GDP

The raw numbers in current dollars unadjusted for inflation or other factors.

Circular Flow Model

Illustrates how people, businesses, governments, and financial markets exchange money, goods, and services included in the GDP.

Product Market

Where consumers exchange goods and services with producers.

Factor Market

A term economists use for all of the resources that businesses use to purchase, rent, or hire what they need to produce goods or services.

Government Transfers

Payments made for which no current or future goods or services are required in return.

Investment

The action or process of investing money for profit or material result.

Net Exports

The value of a nation’s total exported goods and services minus the value of it’s total imported goods and services.

Expenditure Approach to GDP

Also called the demand approach, it focuses on the demand for goods and services.

Income Approach to GDP

Measures the total income earned through the factors of production.

Value Added Approach to GDP

Adds up all the value of goods at the various stages of production.

GDP Per Capita

A measure of a country’s output per person.

Unemployment Rate

The percentage of the labor force who are not working.

Labor Force

People who are able and willing to work.

Labor Force Participation Rate

The percentage of the adult population that is in the labor force.

Discouraged Workers

People who want a job, but are not actively looking for one because they have given up trying to get to work.

Underemployed

These workers are mismatched with their current job, either by skills or wages.

Natural Rate of Unemployment

The unemployment rate that would exist when the economy produces full employment real output.

Frictional Unemployment

Temporary unemployment or being between jobs.

Structural Unemployment

When changes in the work force make some skills obsolete.

Cyclical Unemployment

Unemployment that is cause by a recession.

Inflation Rate

The pace at which the overall price level is increasing.

Consumer Price Index

Measures the change in income a consumer would need in order to maintain the same standard of living overtime under a new set of prices as under the original set of prices.

Disinflation

A marginal reduction in the inflation rate over a short period. It often reflects a slowdown in economic growth, however it is not usually a sign of economic trouble.

Market Basket

A collection of over 200 categories of items that consumers regularly purchase.

GDP Deflator

A measurement used to determine price inflation or deflation in relation to a specific year.