Chapter 13: Measuring the Economy's Performance

Question 1

GDP-gross domestic product

Answer 1

Total dollar value of all final goods and services produced in a nation in a single year

Question 2

Net exports

Answer 2

Difference between what the nation sells to other countries and what it buys from other countries

Question 3

Depreciation

Answer 3

Loss of value because of wear and tear to durable goods and capital goods

Question 4

NDP net domestic product

Answer 4

Value of the nations total output (GDP) minus the total value lost through depreciation on equipment

Question 5

NI national income

Answer 5

Total income earned by everyone in the economy

Question 6

PI personal income

Answer 6

Total income that individuals receive before personal taxes are paid

Question 7

Transfer payments

Answer 7

Welfare and other supplementary payments that a state or the federal government makes to individuals

Question 8

DPI disposable personal income

Answer 8

Income remaining for people to spend or save after all taxes have been paid

Question 9

Inflation

Answer 9

Prolonged rise in the general price level of final goods and services

Question 10

Purchasing power (of the dollar)

Answer 10

The real goods and services that money can buy; determines the value of money

Question 11

Deflation

Answer 11

Prolonged decline in the general price level of foods and services

Question 12

CPI consumer price index

Answer 12

A statistical measure of the average of prices of a specified set of goods and services purchased by typical consumers in city areas

Question 13

Market basket

Answer 13

Representative group of goods and services used to compile the consumer price index

Question 14

Base year

Answer 14

Year used as a point of comparison for other years in a series of statistics

Question 15

PPI producer price index

Answer 15

Measure of the change in price over time that U.S. producers charge for their goods and services

Question 16

GDP price deflator

Answer 16

Price index that removes the effect of inflation from GDP so that the overall economy in one year can be compared to another year

Question 17

Real GDP

Answer 17

GDP that has been adjusted for inflation by applying the price deflator

Question 18

Aggregates

Answer 18

Summation of all the individual parts in the economy

Question 19

Aggregate demand

Answer 19

The total of all planned expenditures in the entire economy

Question 20

Aggregate demand curve

Answer 20

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

Question 21

Aggregate supply

Answer 21

Real domestic output of producers based on the rise and fall of the price level

Question 22

Aggregate supply curve

Answer 22

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

Question 23

Business fluctuations

Answer 23

Ups and downs in an economy

Question 24

Business cycle

Answer 24

Irregular changes in the level of total output measured by real GDP

Question 25

Peak/boom

Answer 25

Period of prosperity in a business cycle in which economic activity is at its highest point

Question 26

Contraction

Answer 26

Part of the business cycle during which economic activity is slowing down

Question 27

Recession

Answer 27

Part of the business cycle in which the nation’s output (real GDP) declines for at least six months

Question 28

Depression

Answer 28

Major slowdown of economic activity

Question 29

Trough

Answer 29

Lowest part of the business cycle in which the downward spiral of the economy levels off

Question 30

Expansion/recovery

Answer 30

Part of the business cycle in which economic activity slowly increases

Question 31

Innovation

Answer 31

Transforming an invention into something useful to humans

Question 32

Economic indicators

Answer 32

Statistics that measure the variables in the economy

Question 33

Leading indicators

Answer 33

Statistics that point to what will happen in the economy

Question 34

Coincident indicators

Answer 34

Economic indicators that usually change at the same time as changes in overall business activity

Question 35

Lagging indicators

Answer 35

Indicators that seem to lag behind changes in overall business activity

Question 36

National income accounting

Answer 36

Measurement of the national economy’s performance, dealing with the overall economy’s output and income