Economics Chapters 12 & 13

Real GDP
Gross domestic product expressed in constant, or unchanging prices

Nominal GDP
Gross domestic product measured in current prices

Aggregate Supply
Total amount of goods and services in the economy available at all possible price levels

Nondurable Goods
Goods that last a short period of time

Price Level
Average of all prices in the economy

Intermediate Goods
Goods used in the production of all final goods

Depreciation
Loss of a value of capital equipment that results from normal wear and tear

National Income Accounting
System that collects macroeconomic statistics on production, income, investment, and savings

Gross Domestic Product
Dollar value of all final goods and services produced within a country’s borders in a given year

Durable Goods
Goods that last for a relatively long time

Gross National Product
The annual income earned by US owned firms and US residents

How does an economist calculate GDP for one year using the expenditure approach?
Add together all the amounts spent on final goods and services

What is an underground economy?
The products and income that are not reported as income to the government

What is the difference between real GDP and nominal GDP?
Real GDP is based on constant prices, while nominal GDP is based on the current years prices

Business Cycle
Period of macroeconomic expansion followed by a period of contraction

Expansion
Period of economic growth, measured by rise and fall in GDP

Economic Growth
Steady increase in real GDP

Peak
Height of economic expansion, when real GDP stops rising

Contraction
Period of economic decline marked by falling GDP

Trough
Lowest point in economic contraction, when real GDP stops falling

Recession
Prolonged economic contraction

Depression
Long recession

Stagflation
Decline in GDP combined with a rise in price level

Leading Indicators
Key economic variables that economists use to predict a new phase of a business cycle

What happens to consumer and business spending when the interest rates go up?
Both types of spending decrease

Which of the following finally brought the US economy out of the Great Depression?
World War II

Which of the following was a lasting effect of the OPEC embargo in the 1970s on the US economy?
Reduced use of petroleum

What was the major change in the US economy in the 1990s?
More capital equipment manufacturing

Savings Rate
The proportion of disposable income spent to income saved

Real GDP Per Capita
Real GDP divided by the total population

Capital Deepening
Increase in the amount of capital per worker

Saving
Income not used for consumption

Technological Process
Increase in efficiency gained by producing more output without using more inputs

How does an economist compare the standard of living in two different countries?
By comparing real GDP per capita

What is a saving rate?
Percentage of people who save a significance amount of their income

If the government uses tax money to pay for long term investments, such as roads or other infrastructure, what happens to the economy?
Investment increases

What is one way to measure technological progress?
Total growth minus increases in capital and labor

What is labor productivity?
The amount of output produced per worker

How can a trade deficit actually increase the productivity of an economy?
By importing funds used for capital deepening

Frictional Unemployment
People taking time looking for work after finishing school, people changing jobs, getting let off, taking time off from work,

Structural Unemployment
Changes in consumer demand, lack of education or training for skills in demand, discovery of new resources, development of new technology, jobs moving to other countries

Full Unemployment
A healthy economy that is working properly

Seasonal Unemployment
Industry slowing or shutting down for a season

Very Low Unemployment
An economy that’s growing too quickly

Cyclical Unemployment
Downturn in the business cycle

How can changes in technology or consumer demand make it difficult for people to get jobs?
By changing the number or kind of jobs available

What does the unemployment rate represent?
The percentage of the total work force that is unemployed

What does full employment mean?
There is no cyclical unemployment

What can happen to the economy when the level of unemployment is very low?
It can create a booming economy

Why don’t government planners try to end seasonal unemployment?
Many people do not want to work all year

What is the term for a situation in which a person is overqualified for the job he or she has?
Underemployment

Inflation Rate
Percentage rate of change in price level over time

Deflation
Sustained drop in price level

Consumer Price Index
Price index determined by measuring he price of a standard group of goods bought in the market of a typical urban consumer

Inflation
General increase in prices

Wage-Price Spiral
Rising wages cause high prices

Price Index
Shows how the average price of a standard group of goods changes over time

What is considered one cause of inflation?
Producers raise prices to meet increased costs

Which theory says that inflation occurs when the demand for goods exceeds the existing supply?
Demand Pull Theory

What typically happens to the inflation rate when unemployment falls to very low levels?
It rises

If a person has money invested at 9 percent and the rate of inflation is 5 percent, how much return are they actually making on their investment?
4 percent

Lorenz Curve
Graphed curve that illustrates income distribution in the economy

Workfare
Program that requires work in exchange for assistance

Poverty Rate
Percentage of people in a particular group who are officially considered living in poverty

Poverty Threshold
Level of income below which income is insufficient to support a family or household

How does the US Census Bureau define a family?
Two or more people related by birth who live in the same housing unit

Approximately how much total income does a family of four need to have to be considered above the poverty line?
20,000

What age group in the US has the largest percentage of its members living in poverty?
Children

Which of the following is among the root causes of poverty in the US?
Lack of education

How long can a family collect aid from the Temporary Assistance for Needy Families program?
Maximum of 5 years

What does the Lorenz Curve illustrate about the economy?
The distribution of income

Who are the working poor?
Those who have jobs but do not earn enough

Products that would be used in calculating GDP include? Intermediate goods, durable goods, non durable goods An example of a durable good would be? Used car WE WILL WRITE A CUSTOM ESSAY SAMPLE ON ANY TOPIC SPECIFICALLY FOR YOU FOR …

What are durable goods? goods that have a life expectance of 1-3 years What are nondurable goods? items such as food, clothing, soap, and gasoline because they are considered used up or consumed less than 3 yrs WE WILL WRITE …

National Income Accounting Collects statistics on production, income, investments, and savings and it is part of the commerce department. Gross Domestic Product The dollar value of all final goods produced within a country’s borders in a given year. WE WILL …

An example of a durable good would be? a used car Compared with the expenditure approach to calculating GDP, the income approach is? more accurate WE WILL WRITE A CUSTOM ESSAY SAMPLE ON ANY TOPIC SPECIFICALLY FOR YOU FOR ONLY …

In an economy, when the price level falls, consumers and firms buy more goods and services. This relationship is represented by the… Aggregate demand curve Compared with the income approach to calculating GDP, the expenditure approach is… More practical WE …

Recent changes occurring within the US healthcare system, including lower insurance reimbursement rates, have resulted in More medical practices being owned by hospitals than by individual doctors In economics, choices must be made because we live in a world of …

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