GDP & Data
This government agency conducts the National Income and Product Accounts that measure U.S. GDP.
the Bureau of Economic Analysis
This equation, MV = PY, relates the money supply, velocity, price level, and real output.
Quantity Equation (Quantity Theory of Money)
This empirical relationship states that a 1% rise in unemployment is associated with a 2% fall in real GDP.
Okun’s Law
This economist developed the neoclassical growth model that explains how capital accumulation drives economic growth.
Robert Solow
This concept holds that a $1 increase in government spending raises GDP by more than $1 due to induced consumer spending.
fiscal multiplier
GDP = C + I + G + NX. This letter represents net exports of goods and services.
NX
According to the Fisher Effect, a one percentage point rise in inflation causes this to happen to nominal interest rates.
a one percentage point rise (nominal rate rises one-for-one with inflation)
This theory holds that firms pay above-market wages to increase worker productivity and reduce shirking.
Efficiency of wage theory
In the Solow model, the economy reaches this state when investment equals depreciation and capital per worker stops changing.
the steady state
This model extends IS-LM to the open economy, showing effects of fiscal and monetary policy under fixed and floating exchange rates.
Mundell-Fleming model
This ratio of nominal GDP to real GDP measures the overall price level in the economy.
GDP Deflator
This term describes the extra inflation tax paid by people who hold cash when inflation is unexpectedly high.
shoeleather cost (or inflation tax)
Above-equilibrium wages caused by unions, efficiency wages, or minimum wage laws can cause this type of unemployment.
structural unemployment
This level of capital maximizes consumption per worker in the steady state.
Golden Rule level of capital accumulation
The short-run tradeoff between inflation and unemployment is depicted by this curve.
The Phillips Curve
This type of GDP adjusts for changes in the price level to allow comparisons across time periods.
Real GDP
When the central bank increases the money supply to pay government bills, this extreme form of inflation can result.
Hyperinflation
The unemployment rate that prevails when the economy is in neither a boom nor a recession.
natural rate of unemployment
This is the key variable the Solow model points to as the ultimate driver of long-run growth — it cannot be explained within the basic model
technological progress (total factor productivity)
This curve shows combinations of output and interest rates where the goods market (investment = saving) is in equilibrium.
IS curve
This measures the total market value of all final goods and services produced within a country in a given year
GDP (Gross Domestic Product)
This classical principle states that changes in the money supply affect nominal but not real variables in the long run.
monetary neutrality (or the classical dichotomy)
This type of unemployment occurs when workers are between jobs and searching for new ones.
frictional unemployment
Unlike the Solow model, this type of growth theory tries to explain technological change from within the model using R&D and human capital.
endogenous growth theory
This model combines the goods market and money market to determine output and interest rates in the short run.
IS-LM model