Unit 2 Vocab - Economic Indicators & Business Cycle - AP Macroeconomics

GDP

GDP

How well the economy is thriving

Consumer Spending (C)

Total amount of $ spend on good/services

Investment Spending (I)

Purchases of tools, buildings, & machines

Government Spending (G)

Money spent by the public sector on services

Net Exports (X_N)

Difference in exports & imports

Exports

Goods sold to foreign countries

Imports

Goods purchased from foreign countries

Labor Force

Employed or actively seeking employment

Employment

The total number of employment

Unemployment

A person who is searching for a job

Unemployment Rate

% of labor force unemployed

Natural rate of unemployment

Structural & Frictional unemployment in a growing economy

Frictional Unemployment

Between jobs, recently entered workforce

Structural Unemployment

Skills demanded not met

Cyclical Unemployment

Result downturn in the business cycle

Discourage Workers

Given up searching for jobs/work

Inflation Rate

Pace of overall increase in price-level

Price Level (PL)

Average level of prices for goods/services

Nominal GDP

Measures output using current prices

Real GDP

Adjusting GDP for inflation

Circular Flow Diagram

Flow of money and goods/services

Inventories

Stock of goods & raw materials

Final Goods & Services

Products/Services ready for purchasing

Intermediate Goods & Services

Goods used by businesses for production

Expenditure Approach

Dollar Value of final goods/services products

Income Approach

Another method of calculating GDP

Value-Added Approach

GDP Calculated

Labor Force Participation Rate

% of unemployed/employed working age

Underemployed

Subjecting to low-skill/low-pay jobs

Market Basket

Hypothetical set of consumer intake

Consumer Price Index (CPI)

Tracks changes in prices paid by consumers

GDP Deflator

A price index

Inflation

General increase in price over time

Deflation

General decrease in prices over time

Disinflation

Slowing of rate inflation

Nominal Wage

The amount of salary workers are paid

Real Wage

Income adjusted for inflation

Substitution Bias

Distortion measuring inflation caused by consumers

Quality Change Bias

Overestimation of inflation

Business Cycle

Fluctuations in economic activity

Peak

Temporary maximum in business cycle

Recession

Period of declining real GDP

Trough

Temporary minimum, recession ends

Expansion

Phase when real GDP, income, employment rise

Potential Output

Output level can achieve when producing full employment

Actual Output

Current level of production

Output gap

Difference between actual output and potential output