Chapter 24-25 Terms AP Macro Flashcards
business cycle
recurring increases and decreases in the level of economic activity over periods of years; consist of peak, recession, trough, and expansion phases
recession
a period of declining real GDP, accompanied by lower real income and higher unemployment
real GDP (gross domestic product)
adjusted for inflation; GDP in a year divided by the GDP price index for that year, then index expressed as a decimal
nominal GDP
GDP measured in terms of the price level at the time of measurement; GDP not adjusted for inflation
unemployment
the failure to use all available economic resources to produce desired goods and services; the failure of the economy to fully employ its labor force
inflation
a rise in the general level of prices in an economy; an increase in an economy’s price level
modern economic growth
the historically recent phenomenon in which nations for the first time have experienced sustained increases in real GDP per capita.
saving
disposable income not spent for consumer goods; equal to disposable income minus personal consumption expenditures; saving is a flow. compare with savings
investment
in economics, spending for the production and accumulation of capital and additions to inventories
financial investment
the purchase of a financial asset (stock, bond) or real asset (house, land) or the building of such assets in the expectation of financial gain
economic investment
(see investment) in economics, spending for the production and accumulation of capital and additions to inventories
shock
sudden, unexpected changes in demand (or aggregate demand) or supply (aggregate supply)
demand shock
sudden, unexpected change in demand
supply shock
sudden, unexpected change in supply
inventory
goods that have been produced but remain unsold
inflexible prices (“sticky”)
product prices that remain in place (at least for awhile) even through supply or demand has changed; stuck or sticky prices
flexible prices
product prices are freely moved upward or downward when product demand or supply changes
national income accounting
the techniques used to measure the overall production of a country’s economy as well as other related variables
gross domestic product (GDP)
the total market value of all final goods and final services produced annually within the boundaries of a nation `
intermediate goods
products that are purchased for resale or further processing or manufacturing
final goods
goods that have been purchases for final use (rather than for resale or processing or manufacturing)
multiple counting
wrongly including the value of intermediate goods in the GDP; counting the same good or service more than once
value added
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
expenditures approach
the method that adds all expenditures made for final goods and final services to measure the GDP
income approach
the method that adds all the income generated by the production of final goods and final services to measure the GDP
personal consumption expenditures (C)
the expenditures of households for both durable and nondurable consumer goods
durable goods
a consumer good with an expected life (use) of 3 years or more
nondurable goods
a consumer good with an expected life (use) of less than 3 years
service
an (intangible) act or use for which a consumer, firm, or government is willing to pay
gross private domestic investment (Ig)
expenditures for newly produced capital goods (such as machinery, equipment, tools, and buildings) for additions to inventories
net private domestic investment
gross private domestic investment less consumption of fixed capital; the addition to the nations stock of capital during a year
government purchases (G)
expenditures by government for goods and services that government consumes in providing public services as well as expenditures for publicly owned captial that has a long lifetime; the expenditures of all governments in the economy for those final goods and services
net exports
exports-imports
taxes on production and imports
a national income accounting category that includes such taxes as sales, excise, business property taxes, and tariffs that firms treat as costs of producing a product and pass on (in whole or part) to buyers by charging a higher price
national income
total income earned by resources suppliers for their contribution to GDP + taxes on production and imports; the same of wages and salaries, rent, interest, profit, proprietors, income, and such taxes
consumption of fixed capital
an estimate of the amount of capital worn out or used up (consumed) in producing the gross domestic product (GDP); also called depreciation
net domestic product (NDP)
gross domestic product less the part of the year’s output that is needed to replace the capital goods worn out in producing the output; the nations total output available able for consumption or additions to the capital stock
person incomes (PI)
the earned and unearned income available to resource suppliers and others before the payment of personal taxes
disposable income
personal incomes less personal taxes; income available for personal consumption expenditures and personal savings
price index
an index number that shows how the weighted- average of a “market basket” of goods changes over time relative to its price and a specific base year
base year
the year with which other years are compared when an index is constructed; for example, the base year for a price index
