Cis MacroEco Unit 2

Non-market transactions

Activities not bought and sold in the market, such as unpaid household labor and volunteer work.

Informal economy

Economic activities that are not taxed or regulated, including many freelance and casual jobs.

Transfer payments

Government payments like social security and unemployment benefits that do not result in immediate goods or services.

Black market transactions

Illegal transactions that are not reported to authorities, falling outside of official economic measurements.

Intermediate goods

Goods used in the production of final goods and services not counted separately to avoid double counting.

Secondhand sales

Sales of used goods that do not represent new production and are therefore not included in GDP calculations.

Gross investment

Total amount spent on investment goods within an economy over a specific period, including costs to replace depreciated assets.

Net investment

Derived by subtracting depreciation from gross investment, reflects actual increase in an economy's productive capacity.

Real GDP formula

Real GDP = (Nominal GDP / GDP Price Index) x 100, adjusts nominal GDP for inflation.

Unanticipated inflation effects

Can hurt fixed-income earners, lenders, and employees with fixed salaries, while helping borrowers, asset holders, and companies with pricing power.

Groups included in the labor force

Employed individuals and unemployed individuals actively seeking employment.

Groups excluded from the labor force

Students, retirees, disabled individuals, discouraged workers, homemakers, and military personnel.

Unemployment Rate formula

Unemployment Rate = (Number of Unemployed Individuals / Labor Force) x 100%.

Factors that understate unemployment

Include discouraged workers, underemployment, informal employment, statistical anomalies, and temporary workers.

Expansion phase

Characterized by increasing economic activity, rising GDP, and higher levels of employment.

Peak phase

Stage where the economy reaches its highest activity before a downturn, with the best economic indicators.

Contraction phase

A decrease in economic activity leading to a decline in GDP, higher unemployment, and reduced consumer spending.

Trough phase

The lowest point of the business cycle from which the economy begins to recover back into expansion.