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national income and product accounts (national accounts)
keep track of the flows of money among different sectors of the economy
household
a person or group of people who share income
firm
an organization that produces goods and services for sale
product markets
where goods and services are bought and sold
factor markets
where resources, especially capital and labor, are bought and sold
consumer spending
household spending on goods and services
stock
a share in the ownership of a company held by a shareholder
bond
loan in the form of an IOU that pays interest
government transfers
payments that the government makes to individuals without expecting a good or service in return
disposable income
equal to income plus government transfers minus taxes, is the total amount of household income available to spend on consumption and to save
private savings
equal to disposable income minus consumer spending, is disposable income that is not spent on consumption
financial markets
the banking, stock, and bond markets, which channel private savings and foreign lending into investment spending, government borrowing, and foreign borrowing
government borrowing
the amount of funds borrowed by the government in financial markets
government purchases of goods and services
total expenditures on goods and services by federal, state, and local governments
exports
goods and services sold to other countries
imports
goods and services purchased from other countries
inventories
stocks of raw materials held to facilitate business operations
investment spending
spending on new productive physical capital, such as machinery and structures, and on changes on inventories
final goods and services
goods and services sold to the final, or end, user
intermediate goods and services
goods and services bought from one firm by another firm to be used as inputs into the production of final goods and services
gross domestic product (GDP)
the total value of all final goods and services produced in the economy
value-added approach
the approach to calculating GDP where you survey firms and add up their contributions to the value of final goods and services
expenditure approach
the approach to calculating GDP where you add up aggregate spending on domestically produced final goods and services in the economy — the sum of consumer spending, investment spending, government purchases of goods and services, and exports minus imports
aggregate spending
the total spending on domestically produced final goods and service in the economy—is the sum of consumer spending, investment spending, government purchases of goods and services, and exports minus imports
income approach
the approach to calculating GDP where you add up the total factor income earned by household from firms in the economy, including rent, wages, interest, and profit
value added
value of a producer’s sales minus the value of its purchases of inputs
net exports
the difference between the value of exports and the value of imports (X-IM)
aggregate output
the total quantity of final goods and services produced within an economy
real GDP
total value of all final goods and services produced in the economy during a given year, calculated using the prices of a selected base year in order to remove the effects of price changes
nominal GDP
the total value of all final goods and services produced in the economy during a given year, calculated with the prices current in the year in which the output is produced
chain-linking
the method of calculating changes in real GDP using the average between the growth rate calculated using an early base year and the growth rate calculated using a late base year
GDP per capita
GDP divided by the size of the population; it is equivalent to the average GDP per person
employed
people that are currently holding a job in the economy, either full time or part time
unemployed
people that are actively looking for work but aren’t currently employed
labor force
equal to the sum of employed and unemployed
labor force participation rate
the percentage of the population aged 16 or older that is in the labor force
unemployment rate
the percentage of the total number of people in the labor force who are unemployed
discouraged workers
nonworking people who are capable of working but have given up looking for a job due to the state of the job market
marginally attached workers
people that would like to be employed and have looked for a job in the recent past but are not currently looking for work
underemployed
workers who would like to work more hours or who are overqualified for their jobs
job search
what workers are engaged in when they spend time looking for employment
frictional unemployment
unemployment due to the time workers spend in job search
structural unemployment
unemployment that results when workers lack the skills required for the available jobs, or there are more people seeking jobs in a labor market than there are jobs available at that current wage rate
efficiency wages
wages that employers set above the equilibrium wage rate as an incentive for better employee performance
natural rate of unemployment
the unemployment rate that arises from the effects of frictional plus structural unemployment
cyclical unemployment
the deviation of the actual rate of unemployment from the natural rate. is also the share of unemployment that arises from the business cycle