Week 1 and 2: Measuring Economic Performance (GDP, Unemployment, Inflation and Prices) Flashcards
Gross Domestic Product (GDP)
The market value of the final goods and services produced in a country during a given period
Market value
Provides a convenient way to aggregate many different goods and services produced within an economy
Final goods and services
End products of a process. The products or services that consumers actually use.
Intermediate goods
Goods and services used towards making final goods or services.
Capital good
Long-lived good, which is itself produced and used to produce other goods and services. Examples: Machinery and factories. Counted as final goods for simplicity.
Inflation rate
Percentage change in the CPI over the specified period
Deflating
CPI used to convert quantities measured at current dollar values to real dollar values
Indexing
CPI used to convert real quantities into current-dollar terms. Used in wages to keep up with inflation.
Quality adjustment bias of CPI
Paying more but also getting something better.
Substitution bias of CPI
CPI measures a basket and if one items price rises and consumers switch to a perfect substitute, according to CPI they are worse off.
Substitution bias of CPI
CPI measures a basket and if one items price rises and consumers switch to a perfect substitute, according to CPI they are worse off.
Shoe-leather costs
Inconvenience caused with the increased visits to banks
Noise in the price system
High inflation causes subtle signals transmitted through the price system difficult to detect.
Distortions of the tax system/tax creep
People creep up tax brackets in a progressive tax system.
Unexpected redistribution of wealth
Borrowers pay less when inflation is high, employees earn less when inflation is high.
Interference with long-run planning
High inflation makes long-term planning more difficult.
Menu costs
Costs of changing the prices seen on paper, such as menus at restaurants.
Real interest rate
Annual percentage increase in real purchasing power of a financial asset.
Nominal interest rate
Annual percentage increase in the nominal value of an asset.
Employed
Worked full-time or part-time for at least one hour during the past week.
Unemployed
Did not work during the preceding week but was available and actively seeking for work.
Out of the labor force
Did not work in the past week and was not unemployed.
Out of the labor force
Did not work in the past week and was not unemployed.
Unemployment rate
Number of unemployed people divided by the labor force.
Unemployment spell
Period in which an individual is continuously unemployed.
Natural rate of unemployment
Unemployment that exists independently of whether the economy is in expansion or contraction (frictional and structural unemployment).
Frictional unemployment
Short-term unemployment associated with the process of workers searching for jobs.
Structural unemployment
Long-term and chronic unemployment that exists because the distribution of skills across unemployed workers do not match available jobs in an economy.
Cyclical unemployment
Occurs during periods of economic contraction.
