Handout 2 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
Impute
Calculate and assign
Intermediate Goods
The sales of inputs or component parts of produced goods
Gross National Product (GNP)
Aggregates production by the ownership of the factors of production
Factors of Production
Labor, capital
Pi
Inflation
The Price Level (P)
The price of a representative good/service
Consumer Price Index (CPI)
The most commonly known and used price index
Index
A measure that is unit less, but which accurately captures relative values
Base Year
A year whose prices become the reference prices
Nominal GDP
GDP not adjusted for inflation
Real GDP
GDP adjusted for inflation
Cost of Living Adjustments (COLAs)
Made to many salaries as well as social security payments to assure they maintain their purchasing power when there is inflation
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
Occurs because most of the goods in the CPI basket are of better quality over time
GDP Deflator
Comparison between Nominal and Real GDP
Debt Instruments
Written promises to deliver specified amounts of money on specified future dates
Mature
Occurs on the last date of their promised payments
Bonds
One common type of debt-instrument where one sells a bond and promises to pay a fee to the owner of the bond
Nominal Interest Rate (i)
Interest rate on bond
Promissory Note
Another common form of debt-instrument where the borrower signs a note with a schedule of promised payments by the borrower to the bank
Ex Ante Real Interest Rate (r)
The real interest rate that is expected to prevail going forward
Ex Post Real Interest Rate (R)
What the real interest rate actually was
Labor Force (LF)
Those who want to work, and are either employed (E) or unhappy that they cannot land jobs and are unemployed
Underemployment
Settling for workers for jobs beneath their skill levels; One type of enderemployment
Discouraged Workers
People who are viewed as unemployed by theory but no 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 the potential workers in an economy that belongs to the labor force
Working-Age Population
The government measure for the potential workers
