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Unit 2 AP Macro
| Term | Definition |
|---|---|
| GDP | Gross domestic product; the total market value of all final goods/services produced within 1 year; CIGX |
| CIGX | personal consumption; domestic investment; gov purchases; net exports |
| Nominal GDP calculation | P x Q |
| Real GDP calculation | Base year price x Q |
| Real GDP | GDP adjusted for inflation |
| Labor force | those employed and unemployed |
| unemployed | Don't have a job but they are currently looking |
| Unemployment rate | the percentage of the labor force that isn't employed |
| structural unemployment | not enough jobs for the skills they have because they aren't in demand |
| frictional unemployment | someone in between jobs |
| cyclical unemployment | follows business cycle |
| natural rate of unemployment | frictional + structural |
| inflation | rise in overall price level; rise in price doesn't matter, it's the rate of change that matters |
| real wages | difference between what you're making and prices in the economy |
| real interest rates | nominal interest - expected interest |
| actual inflation rate | how much inflation actually goes up |
| expected inflation rate | what people expect the inflation rate to go up or down to |
| CPI | Consumer Price Index; most widely used measure of inflation |
| Market basket | basket of goods and services purchased; 80k goods and services that an urban family of 4 consumes |
| Calculating base year in CPI | the base year always equals 100 |
| Why are transfer payments indexed to CPI? | Allows people to maintain purchasing powers |
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