Economics - Unit 5 - Irondale

Economics key vocabulary - unit 5 - measuring the economy

Circular flow

a model that shows the interaction between households and firms in a free market economy

Household

a person or group of people living in a single residence

firm

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

Product market

where households buy the goods and services that firms produce

Factor market

where firms purchase the factors of production (land, labor, capital and entrepreneurship) from households.

Gross Domestic Product

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

Consumption

measures the purchases of final goods and services by households

Investment

measures the purchases of final goods and services by firms

Intermediate goods

goods that are used in the production of other final goods. They are not counted in the GDP

Transfer payments

Government collects taxes from households and businesses. Some of that money goes to programs that directly pay people benefits. This is not counted in GDP because nothing is bought or sold, it is just transferring money from one part of the economy to another.

Non-market Activities

Goods and services that people make or do themselves.  Since they are not bought, sold or recorded. These are not included in the GDP

Underground economy

includes transactions that are not reported to the government. For example, cash transactions without a receipt or illegal activities. These are not included in the GDP

expansion

a period of economic growth as measured by a rise in real GDP

recession

a period of significant economic decline lasting six months or more

leading indicators

a set of key economic variables that economists use to predict future trends in a business cycle

real GDP per capita

real GDP divided by the total population of a country

unemployment rate

the percentage of a nation’s labor force that is unemployed

civilian labor force

all nonmilitary people who are employed or unemployed

Frictional unemployment

People who quit their jobs, laid

Structural unemployment

occurs when workers skills do not match those needed for the jobs that are now available.

Cyclical unemployment

occurs during a contraction in the business cycle. Caused when there is not enough demand for the goods and services workers would have produced.

Seasonal unemployment

Occurs when industries slow or shut down for a season or make seasonal shifts in their production schedules. (ex. Construction workers in the winter, ski instructors in the summer, etc.)

discouraged workers

someone who wants a job but has given up looking

inflation

a general increase in prices across an economy

price index

a measurement that shows how the average price of a standard group of goods changes over time

inflation rate

the percentage rate of change in price level over time

fixed income

income that does not increase even when prices go up

deflation

a sustained drop in the price level