Chapter 13: Measuring the Economy's Performance Flashcards
GDP-gross domestic product
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
NDP net domestic product
Value of the nations total output (GDP) minus the total value lost through depreciation on equipment
NI national income
Total income earned by everyone in the economy
PI personal income
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
DPI disposable personal income
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 (of the dollar)
The real goods and services that money can buy; determines the value of money
Deflation
Prolonged decline in the general price level of foods and services
CPI consumer price index
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
PPI producer price index
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 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
Innovation
Transforming an invention into something useful to humans
Economic indicators
Statistics that measure the variables in the economy
Leading indicators
Statistics that point to what will happen in the economy
Coincident indicators
Economic indicators that usually change at the same time as changes in overall business activity
Lagging indicators
Indicators that seem to lag behind changes in overall business activity
National income accounting
Measurement of the national economy’s performance, dealing with the overall economy’s output and income
