AP Macroeconomics Unit III
About this set
Created by:
srs10624 on February 13, 2011
Subjects:
Description:
Introduction to macroeconomic measurements of the economy's well-being.
Classes:
afp15, Army Baylor 2012, Ms. Siddall's Economics
Log in to favorite or report as inappropriate.
Order by
48 terms
Terms | Definitions |
|---|---|
 Gross Domestic Product (GDP) | dollar value of all final goods and services produced within a country's borders in a year |
| Final goods | finished products ready for use on their own (ex: computer) |
| Intermediate goods | goods used in the production of other goods (ex: microchip) |
| Durable goods | goods that last longer than three years (ex: cars, houses, washing machines, etc...) |
| Nondurable goods | perishable goods (ex: gas, food, clothes, etc...) |
| Aggregate spending | average of all spending within an economy within a certain time period |
| Underground Economy (aka "Black Market) | goods & services exchanged without being recorded as part of GDP (ex: babysitting for your aunt, painting your own house, etc...) |
| Consumption (C) | households purchases of durable goods, nondurable goods, and services; accounts for 67% of total GDP |
| Gross Private Investment (Ig) | spending in order to increase future output or productivity; aka - research & development (ex: new technology, new factory equipment, new production facilities, etc...) |
| Government Spending (G) | any spending by government on goods, services, or factor payments (does NOT include transfer payments) |
| Net Exports | balance of exports (because they count toward our GDP) minus imports (because they count against since they were made somewhere else) |
| Transfer Payments | social entitlements and other government support programs that are a redistribution of income and do NOT create a good or service to add to the GDP |
| Aggregate Income | average of all money earned within a certain time period |
| Rent (R) | payment for land resources |
| Wages (W) | payment for labor resources |
| Interest (i%) | payment for capital resources |
| Profits | payments for entreprenuers skills & knowledge of creating goods & services |
| Nominal GDP | gross domestic product (GDP) expressed in current years prices |
| Real GDP (GDPr) | gross domestic product (GDP) expressed in constant prices; adjusted for inflation |
| Real GDP per capita | gross domestic product divided by total population; best measure of a national standard of living |
| Business cycle | period of economic growth followed by economic decline; based on macroeconomic measurements of GDPr, unemployment (u%), and inflation (II%) |
| Peak | height of a macroeconomic expansion/recovery phase; point when GDPr stops rising |
| Contraction | phases of the business cycle mared by a negative GDPr, higher than 5% unemployment, and less than 3% inflation |
| Recession | two consequtive quarters (6 months) of declining GDPr; particularly long or servere economic contraction |
| Expansion/Recovery | phase of the business cycle marked by increasing GDPr, 4-5% unemployment, and 2-3% inflation |
| Trough | lowest point of the contraction phase of the business cycle; point when GDPr stops falling |
| Unemployment rate (u%) | percentage of the labor force that is unemployed |
| Labor force | population that's at least 16 years of age, non-military, non-institutionalized, and ACTIVELY seeking a job |
| Discouraged worker | unemployed worker that has given up looking for a job and is no longer counted in the unemployment rate (because they aren't ACTIVELY seeking a job) |
| Structural unemployment | when workers skills do NOT match jobs avaialble (ex: lack of computer skills) |
| Seasonal unemployment | when workers are off part of the year due to schedules or harvests |
| Cyclical unemployment | unemployment that increaes when the economy is doing well and increases when the economy declines (anything over 5% unemployment) |
| Frictional unemployment | first time job seekers, leaving one job to find another; voluntarily unemployed |
| Inflation (II%) | occurs when the economy's overall price level is increasing |
| Inflation rate (II%) | percentage change in the price level from one time priod to another |
| Consumer Price Index (CPI) | measure of the prices of goods bought by a typical urban consumer |
| GDP deflator | a measure of the price level calculated as the ratio of nominal GDP to real GDP times 100 |
| Indexation | dollar amount is automatically corrected for inlation by law or contract |
| Real interest rate (r%) | interst rate adjusted for inflation; nominal interest rate (i%) - inflation rate (II%) |
| Nominal interest (i%) | the interest rate expressed in current terms; NOT adjusted for inflation; determined by the interaction between the money supply (MS) as controlled by the Federal Reserve and the money demanded (MD) by the public and can be shown on a money market graph |
| Okun's Law | theory that states for every percentage point of unemployment higher than the natural rate of unemployment there is a 2% GDP gap |
| Rule of 70 | principle that it is possible to calculate how long it will take any number to double by dividing by 70 |
| Demand-pull inflation | theory of inlfation caused when demand for goods exceeds existing supply |
| Cost-push inflation | theory of inflation caused by producers raising prices to cover increase production costs |
| Wage-price spiral | theory that rising wages, leads to rising prices, which leads to higher wages, etc... |
| Negative GDP gap | when unemployment is higher than the natural rate the economy has the potential to produce more than it currently is, creating a negative gap between actual GDP & potential GDP (what the economy is capable of producing with it's resources) |
| Positive GDP gap | when unemployment is lower than the natural rate the economy is overproducing causing a actual GDP to be higher than potential GDP; comporable to producing past the Production Possibilities Frontier on the Production Possibilities Curve (PPC) |
| Full-employment | Level of employment when only frictional/seasonal unemployment exists; 4-5% level of unemployment; aka natural rate of unemployment |
First Time Here?
Welcome to Quizlet, a fun, free place to study. Try these flashcards, find others to study, or make your own.
Set Champions
Scatter Champion
14.3 secs by hannahnguy3n
Space Race Champion
2,370 points by odeinthequeen