Chapter 5-7 definitions

Chapter 5 

GDP deflator - a measure of the price level calculated as the ratio of nominal GDP to real GDP times 100 

Real GDP - the production of goods and services valued at constant prices 

Nominal GDP - the production of goods and services valued at current prices 

Net exports - the value of the nation's exports minus the value of its imports; also called trade balance 

Government purchases - spending on goods and services by local, territorial, provincial, and federal governments 

Investment - spending capital equipment, inventories, and structures, including household purchases of new housing 

Consumption - spending by households on good and services, with the exception of purchasing of a new house 

Gross domestic product ( GDP ) - the market value of all final goods and services produced within a country in a given period of time

Macroeconomics - the study of economy-wide phenomena, including inflation,unemployment, and economic growth
Microeconomics- the study of how households and firms make decisions and hoe they interact in markets 

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Chapter 6 

Nominal interest rate - the interest rate as usually reported without correction for the effects of inflation 

Real interest rate - the interest rate corrected for the effect of inflation 

Indexation - the automatic correction of a dollar amount for the effects of inflation by law or contract 

Core inflation - a measure of the underlying trend of inflation 

Inflation rate - the percentage change in the price index from the preceding period 

Consumer price index ( CPI ) - a measure of the overall cost of the goods and services bought by a typical consumer 

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Chapter 7 

Catchup effect - the property whereby countries that start off poor tend to grow more rapidly than countries that start off rich 

Diminishing returns - the property whereby the benefit from an extra unit of an input declines as the quantity of the input increases

Technological knowledge - societies understanding of the best way to produce goods and services 

Natural resources - the inputs into the production of goods and services that are provided by nature, such as land, rivers and mineral deposits 

Human capital - the knowledge and skills that workers acquire through education, training, and experience

Physical capital - the stock of equipment and structures that are used to produce goods and services 

Productivity - the quantity of goods and services produced from each hour of a workers time