Jordan’s Economics — Chapter 13 Measuring the Economy

Comprehensive vocabulary flashcards covering the key terms, definitions, formulas, and macroeconomic concepts from Jordan's Economics Chapter 13: Measuring the Economy.

Recession

A significant decline in national economic activity, typically measured as a downturn or decrease in real GDP lasting at least two consecutive quarters ($6$ months).

Inflation

A general increase in the overall price level of goods and services produced in an economy over time.

Business cycle

A recurring pattern of growth and decline (ups and downs) in economic activity over time.

Economic indicators

Statistics that help economists assess, track, and judge the overall health and direction of an economy.

Inflation rate

The percentage change or increase in the average price level of goods and services over a period, such as from one month or year to the next.

Unemployment rate

The percentage of the labor force that is jobless, not employed, and actively seeking work.

Gross domestic product (GDP)

The total market value of all final goods and services produced within a country's borders during a given period of time.

Consumer price index (CPI)

A price index tracking the average price changes of a representative market basket of consumer goods and services purchased by typical households.

Net exports

The total value of a nation's exports minus the total value of its imports ($\text{NX} = \text{Exports} - \text{Imports}$).

Hyperinflation

An extreme, rapid, and out-of-control rise in the general price level that robs currency of its value.

Market value

The price that buyers are willing to pay for a good or service in a competitive marketplace.

Intermediate goods

Goods used in the production of final goods; their value is excluded from GDP calculations to avoid double counting.

Informal economy

Economic activity that takes place outside formal government regulation and reporting; not necessarily illegal.

Real GDP

Gross domestic product adjusted for price changes and inflation, measured using constant dollars from a base year.

Nominal GDP

Gross domestic product valued at today's prices using current-period dollars, without adjustments for inflation.

Per capita GDP

A nation's real gross domestic product divided by its total population, reflecting the average output and standard of living per person.

Constant dollars

Dollar values adjusted to eliminate the effects of inflation by fixing purchasing power to the rate of a specified base year.

Current dollars

Dollar values measured using the prices of the current period, reflecting the purchasing power in the exact year they are spent.

Infant mortality

The rate at which babies die during their first year of life, serving as an indicator of a country's health and nutrition.

Literacy rate

The percentage of people within a population who can read and write.

Life expectancy

The average number of years a person is expected to live based on current population health conditions.

Frictional unemployment

Temporary, short-term unemployment that occurs when a person quits or leaves one job to look for another, or enters the workforce for the first time.

Structural unemployment

Unemployment that occurs when a mismatch develops between workers' skills and the demands of available jobs, often driven by technological advancement.

Cyclical unemployment

Unemployment resulting directly from economic contractions and downturns in the business cycle.

Natural rate of unemployment

The rate of unemployment that persists even when the economy is operating at full employment, historically between $4\%$ and $6\%$.

Seasonal unemployment

Unemployment that occurs when businesses shut down or slow operations during predictable times of the year, often due to weather or seasonal demand.

Cost-of-living index

An index tracking changes in the average cost of a typical bundle of consumer purchases; an alternate name for the Consumer Price Index.

Price index

A statistical measure of average price changes over time for a selected group of goods and services relative to a designated base period.

Involuntary part-time workers

People working fewer than $35$ hours per week who want full-time jobs but settle for part-time work because full-time work is unavailable.

Underground economy

Economic activity concealed from government authorities to evade taxation or legal scrutiny, including illicit activities such as gambling and drug dealing.

Discouraged workers

Unemployed individuals who want to work but have stopped actively searching because they believe no jobs are available; excluded from the official unemployment rate.

Deflationary spiral

A downward cycle where falling prices lead businesses to cut output and wages, causing consumers to postpone spending and prompting further price declines.

Creeping inflation

A slow, gradual, and predictable rise in the general price level over time, historically averaging around $3.4\%$ annually in the United States.

Nominal wages

Wages stated and paid in current dollars based on current prices, without any adjustment for inflation.

Real cost of living

The cost of basic goods and services adjusted for inflation and measured in constant dollars to represent true purchasing power.

Nominal cost of living

The cost of basic goods and services measured using current prices without any adjustment for inflation.

Deflation

A general decrease in the overall price level of goods and services over time, represented by a negative inflation rate.

Depression

A severe, prolonged economic downturn characterized by plunging real GDP, extensive business failures, and exceptionally high unemployment.

Trough

The lowest point of a business cycle contraction before economic activity bottoming out gives way to a new expansion phase.

Expansion

A phase of the business cycle characterized by increasing economic activity, rising output, expanding business investment, and job growth.

Peak

The highest level of economic activity in a business cycle, marking the end of an expansion and the onset of a contraction.

Contraction

A phase of the business cycle characterized by declining economic activity, shrinking real GDP, and increasing unemployment.

Leading economic indicators

Statistical measures (such as housing starts) that consistently rise or fall several months before the broad economy enters an expansion or contraction.

Lagging economic indicators

Statistical measures (such as the unemployment rate) that consistently rise or fall several months after an expansion or contraction has already begun.

Demand-pull inflation

Inflation resulting from total aggregate demand growing faster than the economy's productive supply capacity, pulling prices upward.

Cost-push inflation

Inflation resulting from increases in the cost of the factors of production (such as wages, capital, or energy), which pushes the price level up.

Wage-price spiral

An inflationary feedback loop in which wage increases raise production costs, causing businesses to raise prices, which prompts workers to demand higher wages.

Coincident economic indicators

Economic statistics (such as real GDP and the inflation rate) that consistently rise and fall simultaneously with business cycle expansions and contractions.