MACRO AMSCRO UNIT 2 VOCAB

Gross Domestic Product (GDP)

the total value of all final goods and services produced within a country in a specific time period

circular flow model

graphic representation of how different units of the economy interact

Gross National Product

an estimate of total value of good and services produced by the country’s residents both at home and abroad

factors of production

owned by households- labor, land, capital, and entrepreneurship

product markets

where consumers exchange goods and services with producers

resource market

where businesses purchase the resources they desire to produce the goods consumers demand

consumption

the money people pay for a good/service. flows between the household and the product market

expenditures approach (aka. demand approach)

focuses on the demand for goods and services. (consumption, investment, government spending, net-exports-exports minus imports- NX)

income approach

measure the total income earned through the factors of production

value-added approach (aka production approach)

involves determining the value of goods and services (the output of the production process) and subtracting the goods and services that were used in generating that output (referred to as intermediate consumption)

intermediate goods

ones used to produce final goods

final good

is one sold to the consumer who will actually use it

underground economy

transactions that do not go through traditional markets, and is difficult to place a monetary value on them

nonmarket transactions

domestic activities, such as cooking, cleaning, and child care that have no specific money value associated with them despite their clear economic value

economic well-being

consist of the material living conditions that people experience and their access to goods and resources

unemployment rate

the percentage of the labor force who are not working

labor force

people who are able and willing to work

frictional unemployment

occurs when workers are searching for jobs perhaps because they are changing occupation, moving to a new city, or just looking for more satisfying employment. *always present in an economy

structural unemployment

results from shifts in the economy, such as the decline of a particular industry, technological changes, trade agreements. characterized by a mismatch between an employee’s skills and an employer’s needs

cyclical unemployment

occurs as a consequence of a downturn in the overall economy. associated with the business cycle

CUR(capacity utilization rate) = AUR(avg unit retail) - NRU(natural rate of unemployment)

seasonal unemployment

occurs during times of the year when the demand for certain types of labor is low

labor force participation rate

compares the size of the labor force with the number of people who could potentially be part of the labor force

LFPR (labor force participation rate) = LF/Total Population over age of 16

full employment rate

a condition when anyone who wants to work can get work. in the united states it is about 4% of unemployment

consumer price index (CPI)

a measure that tracks the change in the average price of a group of consumer goods and services

inflation

an overall rise in the price of goods and services

inflation rate

the measure of the change in purchasing power of peoples money

real variables

values that are adjusted for inflation

deflation

an overall drop in the price of goods and services

disinflation

a marginal reduction in the inflation rate over a short period of time

demand-pull inflation

most common cause of inflation; caused when there is an increase in demand by the consumer, suppliers respond by raising prices

aggregate demand

the total demand for all finished goods and services that consumers want at current prices

aggregate supply

the total amount of goods and services that suppliers want to supply at current prices

cost-push inflation

when aggregate supply decreases. less supply means consumers pay higher prices for goods and services

inflationary spiral

occurs when prices increase, workers ask for higher wages, input cost rise, suppliers supply less goods/services, less goods/services means consumers pay more

Nominal GDP

unadjusted for inflation. quantifies the total value in money, rather that units of production, of all the goods produced in a year

Real GDP

adjusted for inflation and deflation. better reflects the country’s actual changes in the quantity of production

GDP Deflator

measurement used to determine price inflation or deflation in relation to a specific year

GDP per Capita

calculated by dividing a country’s GDP by its population, is a measure of a country’s output per person

recession

periods of economic contraction that can last from a few months to several years

expansion

a phrase of increasing employment, economic growth, and pressure for price increases

peak

the maximum growth stage of the economy

contraction

characterized by increasing unemployment, decreasing economic activity, and declining economic output

trough

the lowest point in economic activity

recovery

eventual upward direction of the economy following a trough

output gap

the difference between the economy’s actual output and the potential output

depression

a prolonged contraction, or recession

potential output

how much the economy could ideally produce if it used all its resource, including employees, natural resources, equipment, and technology

natural rate of unemployment

the expected and acceptable unemployment rate. in the united states it is about 4% of unemployment

(FU +SU)/LF

actual output

what has been achieved in reality in the economy