Unit 2 (Ch. 23-24, 28) Vocabulary

Question 1

microeconomics

Answer 1

the study of how households and firms make decision and how they interact in markets

Question 2

macroeconomics

Answer 2

the study of economy-wide phenomena, including inflation, unemployment, and economic growth

Question 3

gross domestic product (GDP)

Answer 3

the market value of all final goods and services produced within a country in a given period of time

Question 4

consumption

Answer 4

spending by households on goods and services, with the exception of purchases of new housing

Question 5

investment

Answer 5

spending on capital equipment, inventories, and structures, including household purchases of new housing

Question 6

government purchases

Answer 6

spending on goods and services by local, state, and federal governments

Question 7

net exports

Answer 7

spending on domestically produced goods by foreigners (exports) minus spending on foreign goods by domestic residents (imports)

Question 8

nominal GDP

Answer 8

the production of goods and services valued at current prices

Question 9

real GDP

Answer 9

the production of goods and services valued at constant prices

Question 10

GDP deflator

Answer 10

a measure of the price level calculated as the ratio of nominal GDP to real GDP times 100

Question 11

consumer price index (CPI)

Answer 11

a measure of the overall cost of the goods and services bought by a typical consumer

Question 12

inflation rate

Answer 12

the percentage change in the price index from the preceding period

Question 13

producer price index

Answer 13

a measure of the cost of a basket of goods and services bought by firms

Question 14

indexation

Answer 14

the automatic correction of a dollar amount for the effects of inflation by law or contract

Question 15

nominal interest rate

Answer 15

the interest rate as usually reported without a correction for the effects of inflation

Question 16

real interest rate

Answer 16

the interest rate corrected for the effects of inflation

Question 17

labor force

Answer 17

the total number of workers, including both the employed and the unemployed

Question 18

unemployment rate

Answer 18

the percentage of the labor force that is unemployed

Question 19

labor-force participation rate

Answer 19

the percentage of the adult population that is in the labor force

Question 20

natural rate of unemployment

Answer 20

the normal rate of unemployment around which the unemployment rate fluctuates

Question 21

cyclical unemployment

Answer 21

the deviation of unemployment from its natural rate

Question 22

discouraged workers

Answer 22

individuals who would like to work but have given up looking for a job

Question 23

frictional unemployment

Answer 23

unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills

Question 24

structural unemployment

Answer 24

unemployment that results because the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one

Question 25

job search

Answer 25

the process by which workers find appropriate jobs given their tastes and skills

Question 26

unemployment insurance

Answer 26

a government program that partially protects workers’ incomes when they become unemployed

Question 27

union

Answer 27

a worker association that bargains with employers over wages, benefits, and working conditions

Question 28

collective bargaining

Answer 28

the process by which unions and firms agree on the terms of employment

Question 29

strike

Answer 29

the organized withdrawal of labor from a firm by a union

Question 30

efficiency wages

Answer 30

above-equilibrium wages paid by firms to increase worker productivity

Question 31

indexation

Answer 31

the automatic correction of a dollar amount for the effects of inflation by law or contract

Question 32

nominal interest rate

Answer 32

the interest rate as usually reported without a correction for the effects of inflation

Question 33

real interest rate

Answer 33

the interest rate corrected for the effects of inflation

Question 34

labor force

Answer 34

the total number of workers, including both the employed and the unemployed

Question 35

unemployment rate

Answer 35

the percentage of the labor force that is unemployed

Question 36

labor-force participation rate

Answer 36

the percentage of the adult population that is in the labor force

Question 37

natural rate of unemployment

Answer 37

the normal rate of unemployment around which the unemployment rate fluctuates

Question 38

cyclical unemployment

Answer 38

the deviation of unemployment from its natural rate

Question 39

discouraged workers

Answer 39

individuals who would like to work but have given up looking for a job

Question 40

frictional unemployment

Answer 40

unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills

Question 41

structural unemployment

Answer 41

unemployment that results because the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one

Question 42

job search

Answer 42

the process by which workers find appropriate jobs given their tastes and skills

Question 43

unemployment insurance

Answer 43

a government program that partially protects workers’ incomes when they become unemployed

Question 44

union

Answer 44

a worker association that bargains with employers over wages, benefits, and working conditions

Question 45

collective bargaining

Answer 45

the process by which unions and firms agree on the terms of employment

Question 46

strike

Answer 46

the organized withdrawal of labor from a firm by a union

Question 47

efficiency wages

Answer 47

above-equilibrium wages paid by firms to increase worker productivity