Macroeconomics 2

Flashcards for Macroeconomics Chapter 2 Review

GDP

A measure of economic activity, encompassing production, expenditure, and income.

Production Approach to GDP

The value of all final goods and services produced in the economy during a specific period.

Income Approach to GDP

The sum of all incomes within the economy during a specific period.

Expenditure Approach to GDP

The total spending within the economy during a specific period.

Nominal GDP

GDP that includes both quantities and prices; it is affected by inflation.

Real GDP

GDP that accounts for quantities only, removing the effect of price changes (inflation).

Inflation Rate

The rate of change in prices over a period.

GDP Deflator

A price index calculated as the ratio of nominal GDP to real GDP.

Consumer Price Index (CPI)

Measures the price of a specific basket of goods and services that represent the typical consumption of households.

Labor Force

The total number of employed and unemployed individuals.

Unemployment

Individuals who are not currently employed but are actively seeking work.

Unemployment Rate

The percentage of the labor force that is unemployed (Unemployment / Labor Force).

Okun's Law

An observed negative relationship between unemployment and GDP growth.

Phillips Curve

An observed inverse relationship between unemployment and inflation.