Econ Unit 3 Vocabulary - Economic Indicators and Fiscal Policy

Three Macroeconomic Goals

Economic Growth, Price Stability, and Full Employment

Steady Economic Growth

entrepreneurship, firm productivity, productive resource availability

Nominal Gross Domestic Product (GDP)

the market value of all final goods and services produced within a nation in a given time period

GDP Formula

C + I + G + (X-M)

Consumer Spending (C)

refers to the monetary value of what households spend on final goods and services in the product market in a given time period

Investment (I)

includes the monetary value of final capital goods businesses purchased in a given time period, the value of inventories produced by businesses, but not yet sold, by the end of the measurement time period, and the value of new home construction produced in the given time period

Government Spending (G)

the monetary value of any spending on final goods and services by a local, state, or national government in a given time period 

Net Exports (X-M)

refers to the monetary value of all final goods and services exported by one country minus the monetary value of all final goods and services imported by one country in a given time period

Real GDP

value of current GDP adjusted for inflation, more accurate, used to calculate growth

Not Counted Towards GDP

Black market goods, second hand goods, imports, transfer payments, intermediate goods, and financial transactions

Transfer Payments

social security

Intermediate Goods

goods that make final goods

Financial Transactions

stocks, bonds, and retirement accounts

Price Stability 

minimizing increases in the price level over time so that a country’s money will retain its purchasing power over time

Consumer Price Index

measures the change in value of a basket of goods and services purchased by the average urban consumer

Inflation

a sustained increase in the price level in an economy over time

Groups affected by price changes

borrowers and lenders 

Borrowers

take out loans

Lenders

give out loans

Price of Borrowing Money

interest charged over the life of the loan

Tools for Economic Growth

nominal & real GDP

Price Stability Tools

CPI and inflation

Full Employment Tools

unemployment rate