Level 23
Level 24

Measure of Economic Performance

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national income and product accounts
national accounts; keep track of the flows of money between different sectors of the economy
a person or group of people who share income
an organization that produces goods and services for sale
product markets
where goods and services are bought and sold
factor markets
where resources, especially capital and labor, are bought and sold
consumer spending
household spending on goods and services
a share in the ownership of a company held by a shareholder
a loan in the form of an IOU that pays interest
government transfers
payments that the government makes to individuals without expecting a good or service in return
disposable income
equal to income plus government transfers minus taxes, is the total amount of household income available to spend on consumption and to save
private savings
equal to disposable income minus consumer spending, is disposable income that is not spent on saving
financial markets
the banking, stock, and bond markets, which channel private savings and foreign lending into investment spending, government borrowing, and foreign borrowing
government borrowing
the amount of funds borrowed by the government in the financial markets
government purchases of goods and services
total expenditures on goods and services by federal, state, and local governments
goods and services sold to other countries
goods and services purchased from other countries
stocks of goods and raw materials held to facilitate business operations
investment spending
spending on new productive physical capital, such as machinery and structures, and on changes in inventory
final goods and services
goods and services sold to the end user
intermediate goods and services
goods and services brought from one firm by another firm to be used as inputs into the production of final goods and services
gross domestic product
GDP; the total value of all final goods and services produced in the economy during a given year
aggregate spending
the total spending on domestically produced final goods and services in the economy-is the sum of consumer spending (*C*), investment spending (*I*), government purchases of goods and services (*G*), and exports minus imports (*X-IM*)
value added
the value of its sales minus the value of its purchases of inputs
net exports
the difference between the value of exports and the value of imports (*X-IM*)
aggregate output
the total quantity of final goods and services produced within an economy
real GDP
constant dollars, adjusted for inflation; Nom# x Real$
nominal GDP
current; # x $
the method of calculating changes in real GDP using the average between the growth rate calculated using a late base year
GDP per capita
GDP divided by the size of the population; it is equivalent to the average GDP per person
3 groups in the population
jobless, but actively seeking a job and available to work
labor force
(LF) employed + unemployed
labor force participation rate
the percentage of the population aged 16 or older that is in the labor force
unemployment rate
the percentage of the total number of people in the labor force who are unemployed
discouraged workers
nonworking people who are capable of working but have given up looking for a job due to the state of the job market
marginally attached workers
would like to be employed and have looked for a job in the recent past but are not currently looking for work
people who work part time because they cannot find full-time jobs
job search
workers who spend time looking for employment are engaged in this
frictional unemployment
happens voluntarily, refers to friction in peoples lives
structural unemployment
ones skills are no longer needed in the economy
efficiency wages
wages that employers set above the equilibrium wage rate as an incentive for better employee performance
natural rate of unemployment
the unemployment rate that arises form the effects of *frictional* plus *structural* unemployment
cyclical unemployment
happens when economy does badly
real wage
the wage rate divided by price level
real income
income divided by the price level
inflation rate
the percentage change per year in a price index-typically the consumer price index
shoes-leather costs
the increased costs of transactions caused by inflation
menu costs
the real costs of changing listed prices
unit-of-account costs
arise from the way inflation makes money a less reliable unit of measurement
nominal interest rate
the interest rate actually paid for a loan
real interest rate
the nominal interest rate minus the rate of inflation
slows the growth of inflation
aggregate price level
is a measure of the overall level of prices in the economy
market basket
a hypothetical set of consumer purchases of goods and services
price index
a general measure of prices in the economy
consumer price index
CPI; measure the cost of the market basket of a typically urban American family
producer price index
PPI; measures changes in the prices of goods and services purchased by producers
GDP deflator
for a given year is 100 times the ratio of nominal GDP to real GDP in that year
Level 25