Chapter 11: Basic Economics Concepts, Economic Indicators, and the Business Cycle

Gross Domestic Product

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

Depreciation

decline in value of capital over time.

Deflation

sustained decrease in overall price level.

Inflation

sustained increase in overall price level.

Labor force participation rate

number of people in labor force divided by working- age population.

Okuns Law

for every 1% increase in unemployment rate above natural rate, output falls 2-3 %.

Full employment

level of unemployment that corresponds with natural rate of unemployment.

Business cycle

epeating fluctuation of financial and economic activity.

Gross Domestic Product Deflator

alternative general price index that reflects importance of products in current market baskets.

Nominal salary

actual number of dollars a person earns.

Real salary

purchasing power of dollars.

Labor force

_includes employed and unemployed adults.

Gross Domestic Product (GDP)

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

National income (NI)

sum of income earned by factors of production of the countrys citizens

Personal income (PI)

income received by a household before personal income taxes

Depreciation

decline in value of capital over time

Labor force

includes employed and unemployed adults

Labor force participation rate

number of people in labor force divided by working-age population

Discouraged workers

people who are able and willing to work but stop trying to find work due to frustrations

Full employment

level of unemployment that corresponds with natural rate of unemployment

Okuns Law

for every 1% increase in unemployment rate above natural rate, output falls 2-3%

Inflation

sustained increase in overall price level

Deflation

sustained decrease in overall price level

Nominal salary

actual number of dollars a person earns

Real salary

purchasing power of dollars

Consumer Price Index (CPI)

governments gauge of inflation

Producer Price Index (PPI)

measures changes in prices of wholesale goods

Gross Domestic Product Deflator

alternative general price index that reflects importance of products in current market baskets

Business cycle

repeating fluctuation of financial and economic activity

Say’s Law

supply creates its own demand