AP Macroeconomics Flashcards

Gross Domestic Product (GDP)

Government Broadest measurement of the Economy

Nominal GDP

GDP measured at current prices, without adjusting for inflation.

Real GDP

GDP adjusted for inflation, reflecting the actual value of goods and services.

GDP per Capita

GDP divided by the total population, showing economic output per person.

Unemployment Rate

The percentage of people in the labor force who are actively looking for a job but can’t find one.

Labor Force Participation Rate

The percentage of people who are either employed or actively looking for a job out of the working-age population.

Frictional Unemployment

Short-term unemployment occurring when people are between jobs or just entering the job market.

Structural Unemployment

Replaced by technology

Cyclical Unemployment

Laid off. Unemployment is caused by a downturn in the economy (recession) when businesses reduce hiring.

Natural Rate of Unemployment (NRU)

The level of unemployment that exists when the economy is stable, combining frictional and structural unemployment.

Inflation

The rate at which the general level of prices for goods and services rises, reducing purchasing power.

Consumer Price Index (CPI)

A measure that tracks changes in prices of a typical basket of goods and services over time.

Deflation

A decrease in the general price level of goods and services, opposite of inflation.

Stagflation

A situation where the economy faces high inflation and high unemployment simultaneously.

The Business Cycle

The natural rise and fall of economic activity over time, including four stages: Expansion, Peak, Contraction (Recession), Trough.

Expansion

Economic growth, increasing employment and rising incomes

Peak

The economy is at its highest point before it starts to slow down

Trough

The lowest point of the cycle, signaling the end of the recession and the start of a recovery

Potential Output

The maximum amout of goods and services an economy can turn out when it is most effective.

Real GDP Calculation

nominal GDP / real GDP x 100

Growth Rate Calculation

year 2 GDP - year 1 GDP / year 1 GDP x 100

Inflation Rate Calculation

year 2 CPI - year 1 CPI / year 1 CPI x 100

Unemployment Rate Calculation

(Number of Unemployed / Number of Labor Force) * 100