Econ 1020 U1 Macroeconomic Concepts and Measures

Good

A tangible object that satisfies your desires

Service

An intangible thing that satisfies yours desires

Resource

An input used to produce goods and services

Ex: labor, natural resources, knowledge

Economics

Study of how people use available resources to satisfy their desires

Microeconomics

The study of individual choices, specific markets, and industries

Macroeconomics

The study of the performance of economy as a whole

Positive Statements

Statements the relate facts to verifiable hypotheses

Ex: if statements are true or false

Normative Statements

Statements the relate to opinions and value judgements

Ex: Statements that can’t be proven true/false

Market

A mechanism that allows a buyer and seller to meet enabling transaction between them

Price Ceiling

A legal max price sellers are allowed to charge for a good

Price floor

A legal min price buyers must pay for a g/s

GDP(Gross Domestic Product)

Market value of all final goods and services produced within a country in a given time period

Final Goods

Goods intended for the final user

Intermediate Good

A good that is an input into another good

Capital Goods

Goods sold to final users are included in GDP

Production Possibilities Frontier

An economic model showing the maximum combinations of two goods that are possible for a society to produce given available resources and technology

Ceteris Paribus

Assumption that all quantities of all other g/s aren’t changing

Trade Surplus

When eXports exceed iMports X > M

Trade Deficit

When iMports exceed eXports X < M

Price Level

An overall measure of individual prices in an economy

Price Index

Used to measure price level

Market Basket

The hypothetical cost of set g/s

Consumer Price Index (CPI)

A measure of the cost of a fixed market basket of g/s purchased by a typical urban consumer

Indexation

Process of adjusting nominal incomes so as to maintain their purchasing power over g/s

Substitution bias

COLAs(cost of living adjustments) based on CPI may overstate actual col increase bc when price level rises, consumers often switch to cheaper alt goods

GDP Inflator

A price index measuring overall level of prices of all items in a GDP

Inflation

Sustained increase in level of g/s, a decrease in purchasing power with dollars

Deflation

Sustained decrease in level of g/s, an increase in purchasing power with dollars

Inflation Rate

Percentage increase in price overtime

Civilian Noninstitutional Population

People who are

• Ages 16+

• Not in jail or mental facility

• Not in the army

EQ for Price Index

EQ for CPI

EQ for Real Income

EQ for Real GDP

EQ for Inflation Rate

Labor Force

Persons who are either employed or unemployed

Not in Labor Force

Persons in civilian noninstitutional population who aren’t employed or unemployed

Economic Growth

Increase in the amount of g/s produced by an economy overtime

Real GDP per Capita

A country’s real GDP divided by its population size

Growth Rate EQ

Cyclical Unemployment

Natural rate of unemployment

Ex: laid off for a week/temerary unemployment

Structural Unemployment

Involuntary unemployment from mismatch or lack of skills

Ex: SOL unemployment

Frictional Unemployment

When someone voluntarily leaves a job and is looking for another

Ex: Looking for job

Labor Productivity EQ

Technological Progress

Process of innovation resulting in new or better ways to produce g/s

Rule of 70

Business Cycle

Periodic fluctuations in level of economic activity

Recession(contraction)

Large decline in economic activity for multiple months in many economies

Depression

Prolonged & severe recession