midterm - chapter 2 Flashcards
What are some effects of inflation?
- workers have to earn more money to maintain some standard of living
- effects people of fixed income the most
What is a cause of deflation?
usually occurs in periods of recession and depression
output per person
GDP per capita
person who owes money
debtor
What are the causes of inflation?
- demand for goods and services is greater than supply
- when large supply of money is spent for goods that are in short supply
the total dollar value of all final goods and service produced in a country during one year
Gross Domestic Product (GDP)
production output in relation to a unit of input
productivity
increase in the general level or prices
inflation
the phase in which unemployment begins to decrease
recovery
sales of durable and non-durable goods brought by consumers
retail sales
- a person that purchases a corporate or government bond
- this means you have lent money to the organization and in return are paid interest for the use of your money
creditor
How do interest rates affect business activities?
- if interest rates are high then will have higher business costs
- if rate is low, then lower business costs
When do we pay interest?
we pay interest when we borrow money
phase marked by a prolonged period of high unemployment, weak consumer sales and business failures
depression
the portion of people in the labor force who is not working
unemployment rate
period in which most peoplewho want to work are working, businesses produce goods and services and the rate of GDP growth increases
prosperity
What is an effect of deflation?
prices of products are lower but people have less money to buy them
When do we receive interest?
when we give money to invest, this is our fee for giving it
movement of economy from one condition to another and back again
business cycle
all people above age 16 who are actively workign or seeking work
labor force
government spends more than it takes in
budget deficit
What are the economic indicators for spending?
- Consumer Spending - the money you earn and spend
- Retail Sales - the sales of durable and nondurable goods bought by consumers
- Unemployment rate - the portion of people in the labor force who are not working
- Gross National Product - GNP - the total market value of goods and services produced by the residents of a country, even if they live abroad
- Gross Domestic Product - GDP - the total dollar value of the final goods and services produced in a country each year
- GDP per Capita - the output per person, calculated by dividing GDP by total population
total amount owed by federal government
National Debt
the interest rate individuals pay to borrow for the purchase of a new home
mortgage rate
What are the 4 phases of the business cycle?
- Prosperity phase
- Recession phase
- Depression phase
- Recovery phase
represents debt for an organization
bond
refers to money spent by business for an item over long period of time
capital project
a decrease in the general level of prices
deflation
stock ownership, means ownership
equity
What causes interest rates to change?
the supply and demand for money
a number that compares prices in one year with prices in an earlier base year; measures inflation
Consumer Price Index
the interest rate banks make available to their best business customers like large corporations
prime rate
What is interest?
the cost of borrowing or lending money
refers to salaries and wages as well as investment income and government payments to individuals
personal income
a number that compares prices in one year with some earlier base year
price index
period in which demand begins to decrease
recession
represents ownership in a corporation
stock
government may spend less than it takes in
budget surplus
