Economic Variables and the Economy
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| show | Gross domestic product (GDP), a basic measure of an economy’s economic performance, is the market value of all final goods and services produced within the borders of a nation in a year.
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| describe the relationships among GDP, net domestic product (NDP), national income (NI), personal income (PI), and disposable income(DI) | show 🗑
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| show | Price indexes are computed by dividing the price of a specific collection or market basket of output in a particular period by the price of the same market basket in a base period and multiply the result by 100.
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| show | Nominal measu.each yr’s output valued in trms of the prices prevailing in that yr.Real measu.each yr’s output in terms of the prices that prevailed in a selc.base yr.Bc real is adjusted for price-level changes,diff.in real R due only to diff.in prod.actv
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| describe some limitations of the GDP measure | show 🗑
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| national income accounting | show 🗑
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| gross domestic product (GDP) | show 🗑
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| show | products that are purchased for resale or further processing or manufacturing
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| final goods | show 🗑
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| multiple counting | show 🗑
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| show | The value of a product sold by a firm less the value of the products (materials) purchased and used by the firm to produce that product. inputs is paid out as wages, rent,interest,& profit.
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| expenditures approach | show 🗑
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| show | The method that adds all the income generated by the production of final goods and services to measure the gross domestic product
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| personal consumption expenditures (C) | show 🗑
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| show | In a typical year, roughly 10 percent of these personal consumption expenditures are on durable goods — products that have expected lives of three years or more. Such goods include new automobiles, furniture, and refrigerators.
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| show | Another 30 percent are on nondurable goods —products with less than three years of expected life. Included are goods like food, clothing, and gasoline.
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| services | show 🗑
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| gross private domestic investment (Ig) | show 🗑
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| show | includes only investment in the form of added capital. The amount of capital that is used up over the course of a year is called depreciation. So
Net investment=gross investment-depreciation
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| government purchases (G) | show 🗑
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| show | Exports minus imports
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| taxes on production and imports | show 🗑
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| show | Total income earned by resource suppliers
for their contributions to gross domestic product plus taxes on production and imports; the sum of wages and salaries, rent, interest, profit, proprietors’ income, and such taxes.
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| show | An estimate of the amount of capital worn out or used up (consumed) in producing the gross domestic product; also called depreciation.
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| net domestic product (NDP) | show 🗑
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| personal income (PI) | show 🗑
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| show | Personal income less personal taxes; income available for personal consumption expenditures and personal saving
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| show | GDP measured in terms of the price level at the time of measurement; GDP not adjusted for inflation.
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| real GDP | show 🗑
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| price index | show 🗑
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| explain how economic growth is measured | show 🗑
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| show | The US & other industrial economies have gone through periods of fluctuations in real GDP, employment,&the price level. Although they have certain phases in common—peak, recession, trough, expansion—business cycles vary greatly in duration and intensity.
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| describe the relationship between unemployment and inflation | show 🗑
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| explain how unemployment is measured | show 🗑
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| show | Inflation is a rise in the general price level&is measured in the US by the Consumer Price Index (CPI).When inflation occurs,each $ of income will buy fewer goods&services than before.That is, inflation reduces the purchasing power of money.
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| show | Unanticipated inflation arbitrarily redistributes real income at the expense of fixed-income receivers, creditors, an savers. If inflation is anticipated, individuals & bus. may be able to take steps to lessen or eliminate adverse redistribution effects.
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| show | An increase in real GDP occurring over some time period.
• An increase in real GDP per capita occurring over some time period.
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| real GDP per capita | show 🗑
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| rule of 70 | show 🗑
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| show | is characterized by sustained and ongoing increases in living standards that can cause dramatic increases in the standard of living within less than a single human lifetime.
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| leader countries | show 🗑
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| show | As it relates to economic growth, countries
that adopt advanced technologies that previously were developed and used by leader countries.
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| supply factors | show 🗑
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| demand factor | show 🗑
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| efficiency factor | show 🗑
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| show | Total output divided by the quantity of labor employed to produce it; the average product of labor or output per hour of work.
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| show | The percentage of the working-age population that is actually in the labor force
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| growth accounting | show 🗑
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| infrastructure | show 🗑
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| human capital | show 🗑
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| show | Reductions in per-unit production costs that result from increases in output levels
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| show | New and more efficient methods of delivering and receiving information through the use of computers, fax machines, wireless phones, and the Internet.
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| show | A new firm focused on creating and introducing a particular new product or employing a specific new production or distribution method.
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| increasing returns | show 🗑
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| show | Increases in the value of a product to each
user, including existing users, as the total number of users rises.
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| learning by doing | show 🗑
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| show | alternating rises and declines in the level of economic activity, sometime over several years. Individual cycles (one “up” followed by one “down”) vary substantially in duration and intensity.
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| peak | show 🗑
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| recession | show 🗑
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| show | the recession or depression, output and employment “bottom out” at their lowest levels.
The trough phase may be either short-lived or quite
long.
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| expansion | show 🗑
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| show | which constituted slightly more than 50 percent of the total population in 2009. The labor force consists of people who are able and willing to work.
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| show | The percentage of the labor force unemployed at any time
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| show | Employees who have left the labor force
because they have not been able to find employment.
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| show | A type of unemployment caused by workers voluntarily changing jobs and by temporary layoffs; unemployed workers between jobs.
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| show | Unemployment of workers whose skills are not demanded by employers, who lack sufficient skill to obtain employment, or who cannot easily move to locations where jobs are available.
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| show | A type of unemployment caused by insufficient total spending (or by insufficient aggregate demand
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| show | The unemployment rate at which there is no cyclical unemployment of the labor force;
equal to between 4 and 5 percent in the United States because some frictional and structural unemployment is unavoidable.
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| show | The full-employment rate of unemployment; the unemployment rate occurring when there is no cyclical unemployment and the economy is achieving its potential output; the unemployment rate at which actual inflation equals expected inflation.
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| potential output | show 🗑
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| show | Actual gross domestic product minus potential output; may be either a positive amount (a positive GDP gap ) or a negative amount (a negative GDP gap
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| show | The generalization that any 1 -percentage-point rise in the unemployment rate above the full-employment rate of unemployment is associated with a rise in the negative GDP gap by 2 percent of potential output (potential GDP).
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| show | A rise in the general level of prices in an economy.
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| deflation | show 🗑
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| Consumer Price Index (CPI) | show 🗑
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| demand-pull inflation | show 🗑
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| show | Increases in the price level (inflation)
resulting from an increase in resource costs (for example, raw-material prices) and hence in per-unit production costs; inflation
caused by reductions in aggregate supply
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| show | The average production cost of a particular level of output; total input cost divided by units of output.
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| show | The underlying increases in the price level after volatile food and energy prices and removed.
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| nominal income | show 🗑
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| show | The amount of goods and services that can be
purchased with nominal income during some period of time; nominal income adjusted for inflation.
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| show | Increases in the price level(inflation) at a rate greater than expected.
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| show | Increases in the price level (inflation)
that occur at the expected rate.
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| cost-of-living adjustments (COLAs) | show 🗑
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| show | The interest rate expressed in dollars of constant value (adjusted for inflation) and equal to the nominal interest rate less the expected rate of inflation.
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| nominal interest rate | show 🗑
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| show | A very rapid rise in the price level; an extremely high rate of inflation.
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