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Economics Unit 3
Chp 13 and 15 Macroeconomics
| Question | Answer |
|---|---|
| national income accounting | measurement of the national economy’s performance, dealing with the overall economy’s output and income |
| gross domestic product (GDP) | total dollar value of all final goods and services produced in a nation in a single year |
| net exports | difference between what the nation sells to other countries and what it buys from other countries |
| depreciation | loss of value because of wear and tear to durable goods and capital goods |
| net domestic product (NDP) | value of the nation’s total output (GDP) minus the total value lost through depreciation on equipment |
| national income (NI) | total income earned by everyone in the economy |
| personal income (PI) | total income that individuals receive before personal taxes are paid |
| transfer payments | welfare and other supplementary payments that a state or the federal government makes to individuals |
| disposable personal income (DPI) | income remaining for people to spend or save after all taxes have been paid |
| inflation | prolonged rise in the general price level of final goods and services |
| purchasing power | the real goods and services that money can buy; determines the value of money |
| deflation | prolonged decline in the general price level of goods and services |
| consumer price index (CPI) | a statistical measure of the average of prices of a specified set of goods and services purchased by typical consumers in city areas |
| market basket | representative group of goods and services used to compile the consumer price index |
| base year | year used as a point of comparison for other years in a series of statistics |
| producer price index (PPI) | measure of the change in price over time that U.S. producers charge for their goods and services |
| GDP price deflator | price index that removes the effect of inflation from GDP so that the overall economy in one year can be compared to another year |
| real GDP | GDP that has been adjusted for inflation by applying the price deflator |
| aggregates | summation of all the individual parts in the economy |
| aggregate demand | the total of all planned expenditures in the entire economy |
| aggregate demand curve | a graphed line showing the relationship between the aggregate quantity demanded and the average of all prices as measured by the implicit GDP price deflator aggregate demand curve |
| aggregate supply | real domestic output of producers based on the rise and fall of the price level |
| aggregate supply curve | a graphed line showing the relationship between the aggregate quantity supplied and the average of all prices as measured by the implicit GDP price deflator |
| business fluctuations | ups and downs in an economy |
| business cycle | irregular changes in the level of total output measured by real GDP |
| peak/boom | period of prosperity in a business cycle in which economic activity is at its highest point |
| contraction | part of the business cycle during which economic activity is slowing down |
| recession | part of the business cycle in which the nation’s output (real GDP) declines for at least six months |
| depression | major slowdown of economic activity |
| trough | lowest part of the business cycle in which the downward spiral of the economy levels off |
| expansion/recovery | part of the business cycle in which economic activity slowly increases |
| Fed | the Federal Reserve System created by Congress in 1913 as the nation’s central banking organization |
| monetary policy | policy that involves changing the rate of growth of the supply of money in circulation in order to affect the cost and availability of credit |
| Federal Open Market Committee (FOMC) | 12- member committee in the Federal Reserve System that meets 8 times a year to decide the course of action that the Fed should take to control the money supply |
| check clearing | method by which a check that has been deposited in one institution is transferred to the issuer’s depository institution |
| loose money policy | monetary policy that makes credit inexpensive and abundant, possibly leading to inflation |
| tight money policy | monetary policy that makes credit expensive and in short supply in an effort to slow the economy |
| fractional reserve banking | system in which only a fraction of the deposits in a bank is kept on hand, or in reserve; the remainder is available to lend |
| reserve requirements | regulations set by the Fed requiring banks to keep a certain percentage of their checkable deposits as cash in their own vaults or as deposits in their Federal Reserve district bank |
| discount rate | interest rate that the Fed charges on loans to commercial banks and other depository institutions |
| prime rate | rate of interest that banks charge on loans to their best business customers |
| federal funds rate | interest rate that banks charge each other on loans (usually overnight) |
| open-market operations | buying and selling of United States securities by the Fed to affect the money supply |
Created by:
perryherbst
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