Macroeconomics

Price Level

A weighted average of the prices of all goods and services

Price Index

A measure of the price level

Consumer Price Index (CPI)

The weighted average of prices of a specific set of goods and services purchased by a typical household; a widely cited index number for the price level.

Base Year

The year chosen as a point of reference or basis of comparison for prices in other years; a benchmark year

Inflation

An increase in the price level

Real income

Nominal income adjusted for price changes

Nominal Income

The current dollar amount of a person’s income

Unemployment Rate

The percentage of the civilian force that is unemployed.

Unemployment rate = # of unemployed persons ÷ Civilian Labor Force

Employment Rate

The percentage of the civilian noninstitutiinal population that is employed:

Employment rate = # of employed persons ÷ Civilian noninstitutional population

Labor Force Participation Rate

The percentage of the civilian noninstitutional population that is not in the civilian labor force:

Labor force participation rate = Civilian Labor force ÷ Civilian noninstitutional population

Fictional Unemployment

Unemployment that is due to the natural so-called frictions in the economy and that is caused by changing market conditions and represented by qualified individuals with transferable skills who change jobs.

Structural Unemployment

Unemployment due to structural changes in the economy that eliminate some jobs and create others for which the unemployed are unqualified.

Natural Unemployment

Unemployment caused by fictional and structural factors in the economy:

Natural unemployment rate = Frictional unemployment rate + Structural unemployment rate

Full Employment

The condition that exists when the unemployment rate is equal to the natural unemployment rate.

Cyclical Unemployment Rate

The difference between the unemployment rate and the natural unemployment rate.