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44 terms

Economics Chapter 12-13

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National Income Accounting
a system that collects macroeconomic statistics on production, income, investment, and savings
Gross Domestic Product (GDP)
the dollar value of all final goods and services produced within a country's borders in a given year
Intermediate Goods
goods used in the production of final goods
Durable Goods
goods that last for a relatively long time
Nondurable Goods
goods that last a shrot period of time
Nominal GDP
GDP measured in current prices
Real GDP
GDP expressed in constant
Gross National Product (GNP)
the annual income earned by U.S. - owned firms and U.S. citizens
Depreciation
the loss of the value of captial equipment tha tresults from normal wear and tear
Price Level
the average of all prices in the economy
Aggregate Supply
the total amount of goods and services in the economy abailable at all possible price levels
Aggregate Demand
the anound of goods and services in teh economy that will be purchased at all possible price levels
Business Cycle
a period of macroeconomic expansion followed by a period of contraction
Expansion
a period of economic growth as measured by a rise in real GDP
Economic Growth
a steady, long-term increase in real GDP
Peak
the height of an economic expansion, when real GDP stops rising
Contraction
a period of economic decline marked by falling real GDP
Trough
the lowest point in an economic contraction, when real GDP stops falling
Recession
a prolonged economic contraction
Depression
a recession that is especially long and severe
Stagflation
a decline in real GDP combined with a rise in the price level
Economic Variables
1) Business investment
2) Interest rates and credit
3) Consumer expectations
4) External shocks
Leading Indicators
key economic variables that economists use to predict a new phase of a business cycle
Frictional Unemployment
unemployment that occurs when people take time to find a job
Seasonal Unemployment
unemployment that occurs as a result of harvest schedules or vacations
Structural Unemployment
unemployment that occurs when workers' skills do not match the jobs that are available
Cyclical Unemployment
unemployment that rises during economic downturns and falls when the economy improves
Unemployment Rate
the percentage of nations's labor force that is unemployed
Number unemployed/labor force
Full Employment
the level of employment reached when there is no cyclical unemployment
Underemployed
working at a job for which one is overqualified
Inflation
a general increase in prices
Purchasing Power
the ability to purchase goods and services
Price Index
a measurement that shows how the average price of a standard group of goods changes over time
Consume Price Index (CPI)
a price index determind by measuring the price of a standard group of goods meant to represent the 'market basket' of a typical urban consumer

updated cost/base period cost
Market Basket
a representative collection of goods and services
Inflation Rate
the percentage rate of change in price level over time
Core Inflation Rate
the rate of inflation excluding teh effects of food and energy prices
Hyperinflation
inflation that is out of control
Quantity theory
theory that too much money in the econmy causes inflation
Demand-Pull Theory
theory that inflation occurs when demand for goods and services exceeds exsistin supplies
Cost-Push Theory
theory that inflation occurs when producers raise prices in order to meet increased costs
Wage-Price Spiral
the process by which rising wages cause higher prices, and higher prices, and higher prices cause higher wages
Fixed Income
income that does not increase even when prices go up
Deflation
a sustained drop in the price level