Unit 2 Terms Flashcards
Factor Markets
Markets where factors of production (land, labor, capital) are bought and sold.
Consumer Spending
The total expenditure by households on goods and services over a specified period.
Government Spending
Expenditures by the government on goods and services, including public services and infrastructure.
Tax Revenue
The income that the government receives from taxation.
Disposable Income
The amount of money that households have available for spending and saving after taxes have been deducted.
Government Transfers
Payments made by the government to individuals without any goods or services being received in return,
E.X. Social Security.
Private Savings
The portion of households’ income that is not consumed and is saved for future use.
Financial Markets
Markets that facilitate the buying and selling of financial securities, such as stocks or bonds.
Government Borrowing
The act of the government raising funds by issuing debt (bonds) to cover budget deficits.
Investment Spending
Expenditures on capital goods that will be used for future production.
Inventories
The stock of goods and materials that a business holds for the purpose of future sales.
Exports
Goods and services produced domestically and sold to foreign markets.
Imports
Goods and services produced abroad and purchased by domestic consumers.
Aggregate Spending
The total spending in an economy, including consumption, investment, government spending, and net exports.
Net Exports
The value of a country’s export minus its imports.
Employed
Individuals who are currently working or engaged in productive activities.
Labor Force
The total number of people who are willing and able to work, including both the employed and unemployed.
Unemployment Rate
The percentage of the labor force that is unemployed and actively seeking employment.
Discouraged Workers
Individuals who have stopped looking for work because they believe no jobs are available for them.
Underemployed
Workers who are employed part-time or in positions that do not utilize their skills and abilities fully.
Frictional Unemployment
Short-term unemployment that occurs when people are between jobs or entering the workforce.
Structural Unemployment
Long-term unemployment resulting from the changes in the economy that create a mismatch between skills and job requirements
Natural Rate of Unemployment
The level of unemployment that exists when the economy is at full employment, including frictional and structural unemployment.
Cyclical Unemployment
Unemployment that results from economic recessions and downturns.
Inflation
The rate at which the general level of prices for goods and services rises, eroding purchasing power.
Deflation
A decrease in the general price of goods and services.
Price Stability
A situation in which prices in an economy do not change significantly over time.
Real Wage
Wages adjusted for inflation, reflecting the purchasing power of the income earned.
Real Income
Income adjusted for inflation, representing the actual purchasing power of income over time.
Aggregate Price Level
A measure of the overall level of prices in the economy, often represented by a price index.
Market Basket
A collection of goods and services used to measure changes in the price level of an economy.
Consumer Price Index (CPI)
An index that measures the average change over time in the prices paid by consumers for a market basket of consumer goods and services.
Producer Price Index (PPI)
An index that measures the average change over time in the selling prices received by domestic producers for their output.
Nominal Interest Rate
The interest rate before adjusting for inflation, representing the percentage increase in money that the borrower pays to the lender.
Real Interest Rate
The interest rate adjusted for inflation, representing the true cost of borrowing.
Disinflation
A reduction in the rate of inflation, indicating a slowdown in the rate at which prices are rising.
Aggregate Output
The total quantity of goods and services produced in an economy over a specific period.
Real GDP
Gross Domestic Product adjusted for inflation, representing the value of all final goods and services produced in an economy in a given year.
Nominal GDP
Gross Domestic Product measured at the current market prices, unadjusted for inflation.
GDP Deflator
A measure of the level of prices of all new, domestically produced, final goods and services in an economy - compares Nominal and Real GDP.
GDP per Capita
A measure of the economic output per person, calculated by dividing the GDP by the population
Business Cycle
The fluctuations in an economic activity that an economy experiences over time, consisting of expansions and contractions.
Recessions
A period of economic decline characterized by falling GDP, rising unemployment, and reduced consumer spending.
Economic Growth
An increase in the production of goods and services in an economy over a period of time.
Output Gap
The difference between actual output and potential output in an economy, indicating whether the economy is underperforming or overheating.
