Unit 4 Test Flashcards
The dollar amount of all final goods and services produced withing a country’s national borders in a year
GDP
Measures the output of all Americans, including those who produce goods outside of the country; is based on GDP; is smaller than GDP in the US
GNP
a rise in the general price level; it’s important to track because it distorts the economic statistics that we keep
inflation
when the distortions of inflation have been removed; this measure reflects what the GDP would have been in prices had not changed from what they were in the base year
real GDP
a severe recession with unemployment, acute shortages, and excess manufacturing capacity
depression
changes in capital expenditures, inventory adjustments, innovation, imitation, monetary factors, and external shocks.
causes of business cycles
limitations include: not counting those who have become too frustrated or discouraged to look for work, not counting those who have taken a lower-paying job, and not counting those who have taken a part time job instead of a full time job
unemployment rate
unemployment directly related to swings in the business cycle
cyclical unemployment
consumer, investment, government, and foreign
sectors of macroeconomics
an index of average levels of prices for all goods and services in the economy; it’s computed quarterly and has a base year of 1996
implicit GDP price deflator
privately owned by its member banks; national banks-those chartered by the national government-must belong; those chartered by state governments have the choice to belong or not
Federal Reserve System
Requires banks and other depository institutions to keep a fraction of their deposits in the form of legal reserves
fractional reserve system
legal reserves in excess of the reserve requirement; funds the bank can lend to others who may want a loan
excess reserves
wasted resources, political instability, high crime rates, and damage to family values
social costs of economic instability
determined by the intersection of the aggregate supply curve and the aggregate curve
macroeconomic equilibrium
