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