Chapter 7 Economics

317(9)- 323(12)- 329(13)

National income accounting

monitor the economy

gross domestic product

dollar value of all final goods and services

intermediate goods

products used in production of final goods

durable goods

last for a long time

Nondurale goods

last a short period

nominal GDP

measured in current prices

real GDP

constant or unchanging prices

gross national product

annual income earned from firms and citizens

depreciation

loss of value of capital equipment

price level

average prices in the economy

aggregate supply 

total amount of goods and services available 

aggregate demand 

amount of goods and services that will be purchased 

business cycle 

maperios croeconmic expansion followed by macroeconmic contraction

expansion 

a period of economic growth 

economic growth

stead, long-term increase in real GDP

peak

height of an economic expansion 

contraction 

an economic decline 

trough

lowest point in an economy

recession

prolonged economic contraction

depression

deep recession

Stagflation

decline in real GDP

business investment

spending increases GDP

leading indicators 

key economic variables 

real GDP per capita

real GDP divide by the total population of a country

capital deepening

procees of increasing the amount of capital

saving

income that is not used 

savings rate

income that is saved

capital formation

saving made available for investment

technological progress

an increase in efficiency

frictional unemployment

when people take time to find a job

structural unemployment

worker’s skills to not match the job

globalization

countries becoming open

seasonal unemployment 

industries slow or shut down

cyclical unemployment

employment rises during downturns opposite when it falls

unemployment rate

precentage of nation’s labor force that is unemployed

full employment

level of employment

underemployed

overqualified for a job

discouraged workers 

have stopped looking for jobs 

inflation

increase in prices

purchasing power

purchase good and services when prices rise

price index

the average price

consumer price index 

measuring the price of a good 

market basket

collection of goods and services

inflation rate

percentage rate of change in price level

core inflation rate

inflation excluding the effects of food and energy prices

hyperinflation

inflation out of control

quantity theory 

too much money in the ecnomy causes inflation

wage-price spiral

higher prices cause higher wages

fixed income

income does not increase when prices go up

deflation

a drop in the price level

poverty threshold

income is too low to support a family or household

poverty rate 

very low income 

income distribution

how the nations total income is distributed

food stamp program

helps low-income people

lorenz curve

income in the economy

enterprise zones

free from some taxes

block grants 

money to the states 

workfare

work in exchange for assistance

cash transfers

direct payments to the poor

in-kind benefits

goods and services at a reduce price

medical benefits

health insurnace

grant 

free money 

welfare 

programs for low-income families