Foundations
A model showing the continuous movement of money, resources, and goods/services between households and businesses.
What is the Circular Flow Model?
Real GDP divided by population, shows average economic output per person
What is Real GDP per Capita?
Total market value of all final goods and services produced within a country in a given period.
What is Gross Domestic Product? (GDP)
A decrease in the rate of inflation.
What is Disinflation?
People aged 16+ who are not institutionalized or in the military.
What is the Potential Labor Force?
Financial institution that accepts deposits and makes loans
What is a Commercial Bank?
Individuals in an economy who supply labor and consumer goods and services
What is the household sector?
The percentage change in GDP over time.
What is GDP Growth Rate?
Products purchased by the end user, not used to produce other goods.
What are final goods and services?
A general, sustained decrease in prices.
What is deflation?
The total number of employed + unemployed people actively seeking work.
What is the Labor Force?
The price for borrowing money or the reward for saving
What is the Interest Rate?
Households and firms in a macroeconomy are...
What is Interdependent?
GDP measured using current prices
What is Nominal GDP?
Method of calculating GDP by adding consumption, investment, government spending, and net exports.
What is the Expenditure Approach to calculating GDP?
A measure of the average price of a "basket" of goods and services
What is the Consumer Price Index? (The CPI)
Worker not fully utilized in the economy
What is an Underutilized Worker?
Actions by a central bank to change the money supply to influence the economy
What is Monetary Policy?
All firms in an economy that produce goods and services.
What is the business sector?
GDP adjusted for inflation using constant base-year prices
What is Real GDP?
Economic activity that is recorded and taxed
What is a formal market?
This is a cause of inflation where prices rise because demand for goods and services increases.
Someone who stopped looking for work because they believe no jobs are available
What is a Discouraged Worker?
The people with a demand for money
What are "Borrowers"?
Market where final goods and services are bought and sold.
What is the product market?
Percentage of the labor force that is willing and able to work but does not have a job and is actively seeking work.
What is Unemployment Rate?
This type of inflation is where prices rise because production costs increase.
What is "Cost-Push Inflation"?
Short term unemployment while transitioning between jobs
What is Frictional Unemployment?
The central bank of the USA
What is "The Fed" or the "Federal Reserve"?
Large scale aspects of economic activity encompassing an entire country or even the global market.
What is "The Economy" or "The Macroeconomy"?
Percentage change in the general price level over time
What is the Inflation Rate?
A good used in the production of another good, excluded in GDP counting.
What is an Intermediate Good?
The amount of goods and services money can buy.
What is the "Purchasing Power of a Dollar"? (or just "Purchasing Power)
Unemployment caused by a mismatch between worker skills and job requirements
What is Structural Unemployment?
When the money supply is increased
What is Expansionary Monetary Policy?
Two ways the government interacts with the different sectors or markets in the economy...
What is...
1. Government inserts money into the household sector in the form of welfare
2. Government inserts money into the business sector in the form of subsidies
3. Government takes money from the business sector and the household sector in the form of taxes
4. Government buys and sells resources in both the factor market and the product market
The percentage change in wages after adjusting for inflation
What is Real Wage Growth Rate?
These are the 3 noted reasons that GDP can be misleading as an economic indicator.
What is...
1. GDP counts things that don’t make us better off
2. GDP doesn’t count things that do make us better off
3. GDP per capita ignores unequal distribution of income
The 3 groups who feel "Inflationary Pain" the most.
What is...
1. Renters
2. People with most of their wealth in cash/checking accounts
3. People with wages that don't keep pace with inflation
In this type of unemployment data, predictable fluctuations are removed so other trends will be more visible.
What is Seasonally Adjusted Data?
How high the Federal Reserve allowed interest rates to go in 1981
What is 19%?