Macroeconomics: GDP, CPI, and Unemployment

Comprehensive vocabulary flashcards covering macroeconomic indicators, national income accounting (GDP), price indices and inflation (CPI and GDP deflator), and labor market metrics (unemployment categories and rates).

Gross Domestic Product (GDP)

The total market value of all final goods and services produced within an economy in a given year.

Bureau of Economic Analysis

The United States government agency responsible for calculating and reporting the nation's Gross Domestic Product (GDP).

Nominal GDP

A measure of GDP evaluated at current-year prices, meaning it is affected by changes in both price and quantity.

Real GDP

A measure of GDP evaluated using constant base-year prices, meaning it isolates and reflects only changes in the physical quantity of output produced.

Economic Contraction

An economic condition occurring when real GDP decreases over a given time period.

Investment Component of GDP

The GDP expenditure component that includes business purchases of newly produced capital goods and equipment, additions to business inventories (such as unsold finished goods), and household purchases of new housing.

GDP Deflator

A price index reflecting the overall price level of all final goods and services produced domestically, calculated as $\frac{\text{Nominal GDP}}{\text{Real GDP}} \times 100$.

Consumer Price Index (CPI)

A price index that measures the overall cost of a fixed market basket of goods and services purchased by a typical consumer.

Bureau of Labor Statistics (BLS)

The federal agency tasked with tracking, calculating, and officially reporting the Consumer Price Index (CPI) and national unemployment statistics.

Substitution Bias

A limitation of the CPI that arises because the prices of various goods and services do not change in the same proportion from year to year, causing consumers to substitute away from relatively more expensive items while the index assumes a fixed consumption basket.

Base Year (Price Index)

The designated benchmark year used as a point of comparison for price indices, where the value of the index (such as the CPI or GDP deflator) is officially normalized to $100$.

Money Wage (Nominal Wage)

The wage or salary earned by a worker expressed strictly in terms of current monetary units (dollars) rather than in units of goods and services.

Real Wage

The wage or earnings of a worker measured in terms of actual purchasing power, representing the quantity of real goods and services that the wage can purchase.

Real Interest Rate

The rate of interest adjusted for the effects of inflation, calculated as the nominal interest rate minus the inflation rate.

Labor Force

The total number of civilian non-institutionalized individuals aged $16$ and over who are currently employed plus those who are unemployed.

Employed

Civilian adults aged $16$ and over who work for pay, whether full-time or part-time.

Unemployed

Civilian adults aged $16$ and over who are not currently working, are available for work, and are actively seeking employment.

Not in the Labor Force

Civilian adults aged $16$ and over who are neither working nor actively seeking employment, such as full-time students who are not working, retired individuals, and stay-at-home spouses.

Unemployment Rate

The percentage of the labor force that is without a job, calculated as the number of unemployed individuals divided by the total labor force.

Frictional Unemployment

Unemployment resulting from workers taking the time necessary to search for and transition to jobs that best match their skills, tastes, and preferences.

Structural Unemployment

Unemployment that occurs when the skills possessed by workers are no longer in demand, or when institutional wage rigidities (such as minimum wage laws) create a persistent surplus in the labor market.

Cyclical Unemployment

Unemployment associated with macroeconomic downturns, occurring when a person loses their job due to a slowdown in the growth of real GDP or a recession.

Underemployed

A designation for workers who desire full-time employment but can only find part-time work.

Natural Rate of Unemployment

The benchmark unemployment rate around which the actual unemployment rate fluctuates, equal to the sum of frictional unemployment and structural unemployment.

Actual Rate of Unemployment

The total observed rate of unemployment in the economy, equal to cyclical unemployment plus frictional unemployment plus structural unemployment.

Full Employment

An economic state in which cyclical unemployment is equal to $0\%$, meaning only frictional and structural unemployment exist, and the economy produces output sustainably at its maximum capacity.