ECON 200 Handout 2 Key Terms Flashcards
Gross Domestic Product (GDP)
The market value of all newly produced final goods and services produced within a country’s borders over a designated period
Intermediate Goods
Component parts of produced goods
Gross National Product (GNP)
The market value of all newly produced final goods and services produced by factors of production owned by the country’s residents over a designated period
Factors of Production
Labor, capital
Inflation (pi)
Process of prices rising on average across an economy
The Price Level (P)
The price of a good/service
Index
A measure that is unitless, but which accurately captures relative values
Consumer Price Index (CPI)
The most commonly known and used price index
Base Year
The year whose prices become reference prices
Nominal GDP
GDP not adjusted for inflation
Real GDP
GDP adjusted for inflation
Cost of Living Adjustments (COLA)
Made to many salaries as well as social security payments to assure they maintain their purchasing power when there is inflation
Indexing (for Inflation)
The act of adjusting nominal amounts for inflation (so as to keep real amounts unchanged)
Substitution Bias
Exists because the CPI assumes the same, fixed basket of goods over the years in which it is measured without allowing for substitutions within the basket
Quality Bias
Exists because most goods in the CPI basket are of better quality over time
GDP Deflator
The resulting price index that comes from comparing Nominal and Real GDP
Debt-Instruments
Written promises to deliver a certain amount of money on specified future dates
Mature
End
Bonds
A type of debt-instrument where you sell someone a promise to give someone a certain amount of money
Nominal Interest Rate
Interest rate not adjusted for inflation
Promissory Note
A type of debt-instrument where the bank has someone sign a note with a schedule of payments to the bank
Ex Ante Real Interest Rate (r)
r=i-pi^e
Ex Post Real Interest Rate (R)
R=i-pi
Labor Force (LF)
Those who want to work and are either employed or unhappy that they cannot land jobs and are unemployed
Underemployment
Settling by workers for jobs underneath their skill levels
Discouraged Workers
Unemployed by theory but not by the measure of unemployment
Unemployment Benefits
Money provided by the government to those who are not working but claim to be looking for work
Participation Rate
The percentage of potential workers in an economy that belongs to the labor force
Working-Age Population
The government measure for the potential workers, which is the population minus the children and the elderly
Impute
Calculate and assign
