Studied by 7 peopleeconomy
the structure of economic activity in a locality, a region, a country, a group of countries, or the world
gross domestic product
the market value of all final goods and services produced in the nation during a given period, usually a year
consumption
household purchases of final goods and services
investment
the purchase of new plants, new equipment, new buildings, new residences, and net additions to inventories
government purchases
spending on goods and services by all levels of government
net exports
the value of a country’s exports minus the value of its imports
aggregate expenditure
total spending on all final goods and services produced in the economy during the year
aggregate income
the sum of all the income earned by resource suppliers in the economy during the year
depreciation
the value of capital stock that is used up or becomes obsolete in producing GDP during the year
nominal GDP
the economy’s aggregate output based on prices at the time of the transaction; current-dollar GDP
real GDP
the economy’s aggregate output measured in dollars of constant purchasing power; GDP measured in terms of the goods and services produced
consumer price index
measure of inflation based on the cost of a fixed “market basket” of goods and services purchased by a typical family
business cycle
fluctuations reflecting the rise and fall of economic activity relative to the long-term growth trend of the economy
recession
a decline in total production lasting at least two consecutive quarters, or at least six months
expansion
the phase of economic activity during which the economy’s total output increases
leading economic indicators
measures that usually predict, or lead to, recessions or expansions
aggregate output
a composite measure of all final goods and services produced in an economy during a given period; real GDP
aggregate demand
the relationship between the average price of aggregate output and the quantity of aggregate output demanded, with other things constant
price level
a composite measure reflecting the prices of all goods and services in the economy relative to prices in a base year
aggregate demand curve
a curve representing the relationship between the economy’s real price level and real GDP demanded per period, other things constant
aggregate supply curve
a curve representing the relationship between the economy’s price level and real GDP supplied per period, other things constant
standard of living
an economy’s level of prosperity; best measured by the value of goods and services produced, on average, per person
productivity
compared total output to a specific measure of input; usually reflects an average, such as bushels of grain per acre of farmland
labor productivity
output per unit of labor; measured by total output divided by the hours of labor employed to produce that output
human capital
the accumulated knowledge, skill, and experience of the labor force
physical capital
the machines, building, roads, airports, communication networks, and other manufactured creations used to produce goods and services; also called capital goods
capital deepening
an increase in the quantity and quality of capital per worker; one source of rising labor productivity
rules of the game
the formal and informal institutions that provide production incentives and promote economic activity, such as laws, customs, and conventions of the market
industrial market countries
the advanced market economies of Western Europe, North America, Australia, New Zealand and Japan; also called developed countries
developing countries
countries with a lower standard of living because they have relatively less human and physical capital
group of seven
the seven leading industrial market economies, including the United States, United Kingdom, France, Germany, Italy, Japan, and Canada
basic research
the search for knowledge without regard to how that knowledge will be used; a first step toward technological advancement
applied research
research that seeks answers to particular questions or applies scientific discoveries to develop specific products
industrial policy
the view that government-- using taxes, subsidies, and regulations --should nurture the industries and technologies of the future, thereby giving domestic industries an advantage over foreign competition
cluster
firms in the same industry or in related industries that group together in a region
full employment
occurs when there is no cyclical unemployment; relatively low unemployment
underemployment
workers that are overqualified for jobs or work fewer hours than they would prefer
labor force
those in the adult population who are either working or looking for work
unemployment rate
the number of people without jobs who are looking for work divided by the number in the labor force
labor force participation rate
the number in the labor force divided by the adult population
unemployment benefits
cash transfers to unemployment workers who lost their jobs, actively seek work, and meet other qualifications
inflation
an increase in the economy’s price level
demand-pull inflation
Inflation resulting from a rightward shift of the demand curve; greater demand pulls up the price level
cost-push inflation
inflation resulting from a leftward shift of the aggregate supply curve; reduced supply pushes up the price level
nominal interest rate
the interest rate expressed in current dollars as a percentage of the amount loaned; the interest rate on the loan agreement
real interest rate
the interest rate expressed in dollars of constant purchasing power as a percentage of the amount loaned; the nominal interest rate minus the inflation rate
laissez-faire
the doctrine that the government should not intervene in a market economy beyond the minimum required to maintain peace and property rights
demand-side economics
macroeconomic policy that focuses on shifting the aggregate demand curve as a way of promoting full employment and price stability
stagflation
a decline, or stagnation, of a nation’s output accompanied by a rise, or inflation, in the price level
supply-side economics
macroeconomic policy that focuses on a rightward shift of the aggregate supply curve through tax cuts or other changes that increase production incentives
cycle of poverty
children in welfare families may end up on welfare themselves when they grow up
welfare reform
an overhaul of the welfare system in 1996 that imposed a lifetime welfare limit of five years per recipient and other conditions
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