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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, such as refrigerators, cars, and DVD players

nondurable goods

goods that last a short period of time, such as food, light bulbs, and sneakers

nominal GDP

GDP measured in current prices

real GDP

GDP expressed in constant, or unchanging, prices

gross national product (GNP)

the annual income earned by US-owned firms and US residents


the loss of the value of capital equipment that results 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 available at all possible price levels

aggregate demand

the amount of goods and services in the economy that will be purchased at all possible price levels

business cycle

a period of macro-economic expansion followed by a period of contraction


a period of economic growth as measured by a rise in real GDP

economic growth

a steady, long-term increase in real GDP


the height of an economic expansion, when real GDP stops rising


a period of economic decline marked by falling real GDP


the lowest point in an economic contraction, when real GDP stops falling


a prolonged economic contraction


a recession that is especially long and severe


a decline in real GDP combined with a rise in the price level

leading indicators

key economic variables that economists use to predict a new phase of business cycle

real GDP per capita

real GDP divided by the total population

capital deepening

process of increasing the amount of capital per worker


income not used for consumption

savings rate

the proportion of disposable income that is saved

technological progress

an increase in efficiency gained by producing more output without using more inputs

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