GDP
Total value of final goods and services produced domestically.
What is GDP?
Period of declining output and rising unemployment.
What is a recession?
Workers temporarily between jobs.
What is frictional unemployment?
Sustained increase in overall price level.
What is inflation?
Index measuring cost of a fixed basket of goods.
What is CPI?
Income adjusted for inflation.
What is real income?
Portion of additional income spent.
What is marginal propensity to consume?
Total spending in an economy at a given price level.
What are aggregate expenditures?
GDP does not include these secondhand sales.
What are used goods?
The highest point before economic decline.
What is a peak?
Unemployment caused by a mismatch of skills.
What is structural unemployment?
Inflation caused by rising production costs.
What is cost-push inflation?
CPI may overstate inflation due to this inability to adjust consumption.
What is substitution bias?
If nominal income rises slower than inflation, real income will do this.
What is decrease?
If MPC = 0.8, this fraction of new income is saved.
What is 0.2 (MPS)?
The four components of AE are consumption, investment, government spending, and this.
What are net exports?
If nominal GDP rises but price levels rise faster, this happens to real GDP.
What is it decreases?
Government policies aimed at stabilizing fluctuations are called this.
What is stabilization policy?
Unemployment that rises during recessions.
What is cyclical unemployment?
Inflation caused by excessive demand.
What is demand-pull inflation?
CPI = (Cost of basket this year / base year cost) × 100.
This is used to measure this concept.
What is inflation rate?
If wages increase 5% and inflation is 3%, real income changes by this.
What is approximately +2%?
If income rises by $1,000 and consumption rises by $750, MPC equals this.
What is 0.75?
When AE equals GDP, the economy is at this condition.
This component of GDP includes spending on machinery and new construction.
What is investment (I)?
The time between peaks or troughs is called this.
What is the length/duration of a business cycle?
The unemployment rate excludes this group.
What are discouraged workers (not in labor force)?
Unexpected inflation benefits this group.
Who are borrowers?
This problem arises because CPI uses a fixed basket.
What is substitution bias?
Real income depends on nominal income and this variable.
What is the price level?
A higher MPC leads to a larger value of this macroeconomic concept.
What is the spending multiplier?
If AE > GDP, firms will respond by doing this.
What is increasing production?
Why might GDP understate actual well-being? Name one reason.
What is exclusion of non-market activity / inequality / environment?
Explain how investment volatility amplifies business cycles.
What is investment being highly sensitive to expectations and interest rates?
Why might the official unemployment rate understate true unemployment?
What is discouraged workers or underemployment?
Explain how inflation redistributes income between lenders and borrowers.
What is fixed payments lose value benefiting borrowers?
Why might CPI not reflect individual experiences?
What is different consumption patterns?
Evaluate how inflation affects purchasing power across income groups.
What is unequal impact depending on wage adjustments?
Why does a higher MPC lead to stronger fiscal policy effects?
What is more spending circulation in the economy?
Explain how a shift in AE leads to a multiplied change in equilibrium GDP.
What is the multiplier effect through repeated spending rounds?