Ap Macroeconomics: Measurement of Economic Performance Study Guide

Gross Domestic Product

The total value of goods and services produced within the borders of a country during a specific time period, usually one year.

Consumption

the using up of a resource

Investment

the act of redirecting resources from being consumed today so that they may create benefits in the future; the use of assets to earn income or profit

Unplanned Inventories

Actual sales are more or less than expected.

Government Purchases

Spending by federal, state, and local governments on goods and services.

Net Exports

exports minus imports

Nominal GDP

the production of goods and services valued at current prices

real GDP

GDP adjusted for inflation

GDP Deflator

a measure of the price level calculated as the ratio of nominal GDP to real GDP times 100

GDP growth Rates

percent change in GDP from one year to the next

GDP per capita

GDP/population

Circular flow diagram

A diagram that shows how households and firms are related by the exchange of resources and products

Households

The consuming units in an economy

Firm

an organization that uses resources to produce a product, which it then sells

Product(Good) market

The marketplace in which final goods or services are offered for purchase by consumers, businesses, and the public sector.

Factor(Resource) market

Markets where services of the factors of production (not the actual factors of production) are bought and sold

Consumer Price Index (CPI)

a measure of the overall cost of the goods and services bought by a typical consumer

Inflation rate

the percentage increase in the price level from one year to the next

producer price index

(PPI) measure of the change in price over time that United States producers charge for their goods and services

indexation

the automatic correction by law or contract of a dollar amount for the effects of inflation

nominal interest rate

the interest rate as usually reported without a correction for the effects of inflation

real interest rate

The nominal interest rate minus the inflation rate

disinflation

a reduction in the rate of inflation

deflation

A situation in which prices are declining

real wage

The nominal wage adjusted for changes in the price level

real income

what an income will actually purchase after allowing for the effects of inflation

shoe-leather cost

the resources wasted when inflation encourages people to reduce their money holdings

menu cost

the costs to firms of changing prices

labor force

the total number of workers, including both the employed and the unemployed

unemployed

people who are actively looking for a job but aren't currently employed

underemployed

working at a job for which one is overqualified, or working part-time when full-time work is desired

unemployment rate

the percentage of the labor force that is unemployed

labor-force participation rate

the percentage of the adult population that is in the labor force

Discouraged Workers

individuals who would like to work but have given up looking for a job

natural rate of unemployment

the unemployment rate that exists when the economy is at potential GDP

cyclical unemployment

unemployment directly related to swings in the business cycle

frictional unemployment

A type of unemployment caused by workers voluntarily changing jobs and by temporary layoffs; unemployed workers between jobs.

structural unemployment

unemployment that results because the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one

seasonal unemployment

state of being out of work because of the time of year

job search

the process of matching workers with appropriate jobs

unemployment insurance

Program that gives payments to people who have lost their jobs until they find work again