Exam 2 FInancial Literacy

GDP

the value of the output of all final goods and services produced within a country in a given year

Included in GDP

Final goods and services

Excluded from GDP

Intermediate goods, raw materials

Net Exports

Exports-Imports (x-m)

Trade Surplus

(x>m) exports>imports

Real GDP

nominal gdp/(price index*100); adjusted for inflation

Nominal GDP

the economic statistic actually announced at that time; not adjusted for inflation

Trade Deficit

(m>x) imports>exports

Unemployment rate

(unemployed people/total labor force)*100

Unemployment

when a person is without a job, is currently available to work, and actively looking for work

BLS

Bureau of Labor Statistics

Included in BLS

Adults-16+, civilian non-institutionalized population

Excluded from labor force

Available for work but not working; Not available for working

Available for Work but not working

Discouraged Workers

Not Available for Working

Retired, Elderly, Childcare, Lack of Transport, Full time student, active duty

Employed

Full time, part time, underemployed

Labor Force

Employed+unemployed

Unemployment Rate

(unemployed people/total labor force)*100

cyclical unemployment

unemployment closely tied to the business cycle, like higher unemployment during a recession

frictional unemployment

unemployment that occurs as workers move between jobs

structural unemployment

unemployment that occurs because individuals lack skills valued by employers

price index

[cost of market basket (2025)/cost of market basket(2015)]*100

CPI (consumer price index)

a measure of inflation that US gov't statisticians calculate based on the price of level from a fixed basket of goods and services that represent the average consumer's purchases

Inflation Rate Calculation

[(Price Index Y1)-Price Index Y1)Price Index Y1]*100

monetary policy

How a country's central bank manages the money supply and credit conditions to achieve economic goals like stable prices and maximum employment

fiscal policy

a government's use of taxation and spending to influence the economy

Inflation

general and ongoing rise in the level of prices in an entire economy

Basket of goods and services

a hypothetical group of different items, with specified quantities of each one meant to represent a "typical" set of consumer purchases

Fed during recession (monetary)

lowers interest rates, buys government securities through open market operations, and makes it easier for banks to lend money to stimulate economic activity

open market operation

when a central bank buys or sells government securities to influence the money supply and interest rates in the economy

comparative advantage

the ability of an individual, company, or country to produce a good or service at a lower opportunity cost than a competitor

absolute advantage

the ability of an individual or group to carry out a particular economic activity more efficiently than another individual or group.

non tariff Barrier

a trade restriction that is not a direct tax on imports, but uses policies, regulations, and administrative procedures to impede trade

Discretionary fiscal policy

any deliberate action by the government to change spending or taxes to influence the economy.

Expansionary Fiscal Policy

any deliberate action by the government to change spending or taxes to influence the economy.