The GDP Gauge
What are final goods?
To avoid "double counting," GDP only includes these, excluding the wheat used to make bread or the steel used for a car.
What is CPI?
This index measures the average change over time in prices paid by consumers for a "market basket" of goods.
What is Fiscal Policy?
This type of policy involves the government changing tax rates and spending levels
What is a Recessionary/Output Gap?
This gap exists when the actual Real GDP is less than the potential Real GDP at full employment.
What is M1?
This specific "M" category of the money supply includes the most liquid assets, such as physical currency, demand deposits, and traveler's checks
What is the GDP Deflator?
This specific metric is calculated by dividing Nominal GDP by Real GDP and multiplying by 100.
What is Structural Unemployment?
This type of unemployment occurs when a worker's skills no longer match the requirements of the available jobs.
What is the Central Bank?
This institution controls the money supply and manages interest rates
What is a Depression?
This is the term for a severe and prolonged downturn in economic activity that is more intense than a standard recession.
What is Fiat Money?
Because the U.S. dollar is not backed by a physical commodity like gold but instead by government decree, it is known as this type of money.
What is gross private domestic investment?
While buying stocks feels like an investment, in GDP terms, "I" only counts this, such as a construction firm buying a new crane.
What is Full Employment?
This occurs when the "Natural Rate of Unemployment" is the only type of unemployment present in the economy.
What is the Federal Funds Rate?
This is the specific interest rate that commercial banks charge each other for overnight loans of reserves
What is the Phillips Curve?
On a graph, this curve illustrates the short-run trade-off between the rate of inflation and the rate of unemployment.
What is Multiple Deposit Creation/The Money Multiplier effect?
This is the process by which a single deposit leads to a much larger increase in the total money supply through repeated lending
What is non-market production/household production?
Because no market transaction occurs, this massive category of "do-it-yourself" labor—like cleaning your own house—is excluded from GDP.
What is the Real Balance Effect/Wealth Effect?
This economic theory suggests that as the price level rises, the purchasing power of accumulated wealth falls, reducing consumption.
What are Interest Rates?
According to the "Crowding Out" effect, an increase in government deficit spending may lead to an increase in this, which then lowers private investment.
What are Leading Indicators?
These specific indicators, such as building permits or the S&P 500 stock index, tend to change before the rest of the economy.
What are Assets and Liabilities?
On a commercial bank's balance sheet, "Required Reserves" are listed as this, while the money you deposited in your checking account is listed as this.
What is Net Exports?
In the expenditure approach, this variable represents the difference between a nation's exports and its imports.
What is a discouraged worker?
Someone who has given up looking for work due to a lack of jobs is called this; they are notably excluded from the official unemployment rate.
What is the Money Multiplier?
This ratio, the reciprocal of the reserve requirement, determines the maximum amount of money the banking system generates with each dollar of excess reserves.
What is Okun’s Law?
This law describes the negative empirical relationship between a country's GDP gap and its unemployment rate.
What is the Quantity Theory of Money?
This economic theory, expressed by the equation MV = PY, suggests that increasing the money supply too quickly will lead directly to inflation.