ECON TEST 3

GDP

total produced x market value

B

black market (not counted in GDP)

A

abroad (not counted in GDP)

N

non-production transactions (not counted in GDP)

D

double counting (not counted in GDP)

C

consumer

I

investment

G

government

X-M

net exports (exp-imp)

nominal GDP

(todays P x todays Q)

real GDP

(original P x today’s Q)

GDP deflator

(nominal GDP/real GDP) x 100

creeping inflation

inflation in the range of 1% to 3% per year

galloping inflation

more intense form of inflation, 100% to 300%

hyperinflation

inflation in the range of 500% a year and above

demand-pull

when people demand more than the economy can produce

difference between GDP deflator and CPI

GDP reflects prices of all goods and services produced domestically, and CPI reflects the prices of all goods and services bought by consumers

sticky prices

when prices or costs do not adjust rapidly to maintain equillibrium

deflation

when average price level declines

stagflation

inflation rate is high and unemployment rate is high

business cycle

short term ups and downs in the level of economic activity 

depression

a prolonged recession

formula for unemployment rate

(# of unemployed/# labor force) x 100