Chapter 12 Flashcards
National income accounting
System collects macroeconomic statistics on production, income, investment, and savings
Gross domestic product (GDP)
Dollar value of final goods and services produced winthin a country’s borders in a given year
Intermediate goods
Goods used in the production of final goods
Durable goods
Goods 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
Measured in current prices
Real GDP
Expressed in constant, or unchanging prices
Gross national product (GNP)
Annual earned income earned by U.S. - owned firms and U.S. citizens
Depreciation
Loss of value of capital equipment that results from normal wear and tear
Price level
Average of all prices in the economy
Aggregate supply
Total amount of goods and services in the economy available at all possible price levels
Aggregate demand
Amount of goods and services in the economy that will be purchased at all possible price levels
Business cycle
Period of macro economic expansion followed by a period of contraction
Expansion
Period of economic growth as measured by a rise in real GDP
Economic growth
Steady, long term increase in real GDP
Peak
Height of an economic expansion, when real GDP stops rising
Contraction
Period of economic decline marked by falling real GDP
Trough
Lowest point in an economic contraction when real GDP stops falling
Recession
Prolonged economic contraction
Depression
A recession that is especially long and severe
Stagflation
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
Divided by the total population
Capital deepening
Process of increasing the amount of capital per worker
Saving
Income not used for consumption
Savings rate
Proportion of disposable income that is saved
Technological progress
Increase in efficiency gained by producing more output without using more input
