Economics Vocabulary

GDP

GDP

sum total of all economic activities in a nation yearly

Consumption

Spending by individuals and households, Clothes

Investment

Spending for the purpose of increasing consumption/economic activity, The selling part

Government Spending

When the government buys goods or services to stimulate the economy

Net Exports

All exports-all imports, Trying to export more than you are importing

Frictional Unemployment

Workers leave their old jobs without a new one, occurs with students looking for a first job or mothers returning to workforce

Structural Unemployment

Shifts in economy create a mismatch between skills people have and skills needed

Cyclical Unemployment

Caused by low demand and a need to lay off workers, creates more unemployment due to laid off workers having less money and decreasing demand

Natural Unemployment

Consists of frictional and structural unemployment, people are always changing jobs sometimes because of skills being not needed

Long-Term Unemployment

Looking for a job for over 27 weeks, has devastating effects on worker morale, productivity, etc

Seasonal Unemployment

Has a job specific to a season, ie. ski instructors or people who harvest crops.

Classical Unemployment

When wages are so high that employers need to hire less workers, people who are laid off are often victims of classical unemployment

Under Employment

Workers who have jobs but are not working to full skill or ability, often caused by cyclical unemployment and a need for any job, not specifically a job that has a fitting demand

Traditional Economy

• Rural areas, farms, etc

• Own what you produce and sell/trade the surplus

Market Economy

• Supply and demand determine what is produced

• Industrialized (lots of machinery)

Mixed Economy

• Mixture of Market and Command

• Some portions of economy are government-dominated, the rest is free market

Command Economy

• Found in communist economies

• Industrialized (lots of machinery)

• When the government dictates what is produced

Contractionary Fiscal Policy

• Cutting government spending or raising taxes, thus, tax revenue is greater than spending

  • Get more $$$

• Cuts aggregate demand

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CONTRACTS AGGREGATE DEMAND

Expansionary Fiscal Policy

• Speeds growth rate of economy to give it a boost

• Tax cut, increase in government spending

  • Not sustainable long-term

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EXPANDS AGGREGATE DEMAND

Neutral Fiscal Policy

• Balance between government spending and tax revenue where tax revenue goes towards government spending

• Policy has a neutral effect on outcomes

Expenditure Fiscal Policy

• Capital expenditure - investments to a company’s future

• Revenue expenditure - payments to simply keep a company running

  • Depends on government budget

Taxation Fiscal Policy

• Generates revenue by taxing indirect+direct taxes

  • Important for judiciary to impose correct tax rates

• Higher tax → Purchasing power of people decreases

Surplus/Debt Manage

• Government receives more money than it spends = surplus

• Government spends more money than it receives = deficit

  • To fund against deficits, government may need to borrow