Economics units 3 &4

consumer sector

largest sector and people who occupy a living place

investment sector

business

government sector

federal, state, and local governments

foreign sector

consumers and producers outside of the u.s.

CIGNX

consumption, investment, government spending, net exports

GDP

dollar value of all final goods, services, and structures produced within a country’s national borders during a one year period

real GDP

takes inflation into acoount

GDP per capita

used to measure GDP over time and compare with other countries

census

complete count of population, including place of residence.

what GDP doesn’t tell us

1. says nothing about output'

2. tells little about the impact of production on quality of life

3. non market activities

4. improved product quality

GNP

the market value of goods and services produced by labor and property supplied by the u.s. residents.

national income

income left after taxes

personal income

total income before going to consumers before individual income taxes are subtracted

disposable personal income

total income the consumer sector has after personal income taxes.

business cycles

large systematic ups and downs of real GDP

recession

period where real GDP declines for 2 quarters in a row, or 6 consecutive months.

depression

state of the economy where large numbers are unemployed, declining real incomes, and overcapacity in manufacturing.

FDIC

insures your money up to $25,000

expansion

uninterrupted growth in real GDP, ends with a trough, and increase in production, jobs, and income.

capital expedentures

businesses except future sales to be high when the economy is expanding so they invest heavily in capital goods.

inflation

rise in level of prices of goods and services and a decrease in consumer purchasing power.

causes of inflation

demand pull theory, fed gov deficit increases, labor costs increase, excessive monetary growth, and faster than real GDP.

unemployment

making an effort of finding a job but working for less than 1 hour per week

sources of unemployment

1. Frictional unemployment

2. structural unemplyment

3. technilogical unemployment

4. cyclical unemployment

5. seasonal unemployment

poverty threshold

the minimum level of income deemed adaquate in a specific country

reasons for differences in income

1. globalization

2. technilogical advancements

3. tax policies

4. gender’

5. economic conditions

tax

a charge imposed by the gov for public purposes

incidence of tax

the party being taxed is not always the one that bears the burden of a tax.

sin tax

relativity high tax designed to raise revenue and reduce consumption of a socially undesirable product.

luxury tax

a product in which the demand for the good rises faster than income when income grows.

sales tax

collected by states

proportional taxes

individual pays % of their earnnings in taxes

regressive taxes

% of tax goes down as income rises

progressive tax

% of taxes rise as income rises

FICA

tax on employees to pay for social security and medicare

income tax

progressive tax paid through witholdings from payroll system, your check.

corperate income tax

paid by cooperatives

fiscal policy

president directed, through setting the budget, determains what agencies and programs will receive money, determines tax policy for the US government

monetary policy

set by the federal reserve board, responsible for monitoring and controlling the money supply.

deficet

the amount in which a certain amount of money is too small

debt

money that is owed or dued

budget

an estimate of income for a set period of time

federal reserve system

banks must have fraction of resources in their vault

interest rate

rate of borrowing money

Reserve Requirements

1. regualtes banks

2. makes sure they have enough reserves

3. manages the money supply

4. to promote faith in our banking system

5. consumer loan protection

expansionary policy

stimulating or speeding up the economy to help the country during an economic downturn

contractionary policy

slowing down the economy to prevent inflation