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Goods used in the production process that are not final goods and services.
A measure of GDP that controls for changes in prices.
The value of GDP in current dollars.
Sustained increases in the real GDP of an economy over a long period of time.
Purchases of newly produced goods and services by households.
Purchases of newly produced goods and services by firms.
Total new investment expenditures.
Reduction in the value of capital goods over a one-year period due to physical wear and tear and also to obsolescence; also called capital consumption allowance.
Purchases of newly produced goods and services by local, state, and federal governments.
Payments from governments to individuals that do not correspond to the production of goods and services. Not included in GDP.
A good or service produced in a foreign country and purchased by residents of the home country (for example, the United States).
A good or service produced in the home country (for example, the United States) and sold in another country.
Exports minus imports.
The excess of imports over exports.
Y = C + I + G + NX
The total income earned by a nation’s residents both domestically and abroad in the production of goods and services.
Personal income that households retain after paying income taxes.
An index that measures how the prices of goods and services included in GDP change over time.
A method for calculating changes in prices that uses an average of base years from neighboring years.
The date at which output stops falling in a recession.
Individuals who do not currently have a job but are actively looking for work.
The percentage of the population over 16 years of age that is in the labor force.
The component of unemployment attributed to seasonal factors.
Unemployment that occurs during fluctuations in real GDP.
Unemployment that occurs with the normal workings of the economy, such as workers taking time to search for suitable jobs and firms taking time to search for qualified employees.
Unemployment that occurs when there is a mismatch of skills and jobs.
The level of unemployment that occurs when the unemployment rate is at the natural rate.
Payments unemployed people receive from the government.
The percentage rate of change in the price level.
Negative inflation or falling prices of goods and services.
The costs associated with changing prices and printing new price lists when there is inflation.
Costs of inflation that arise from trying to reduce holdings of cash.
An inflation rate exceeding 50 percent per month.
Increases in the stock of capital per worker.
More efficient ways of organizing economic affairs that allow an economy to increase output without increasing inputs.
The knowledge and skills acquired by a worker through education and experience and used to produce goods and services.
Gross domestic product per person adjusted for changes in prices. It is the usual measure of living standards across time and between countries.
The percentage rate of change of a variable from one period to another.
A rule of thumb that says output will double in 70/x years, where x is the percentage rate of growth.
The process by which poorer countries close the gap with richer countries in terms of real GDP per capita.
Income that is not consumed.
A method to determine the contribution to economic growth from increased capital, labor, and technological progress.
The view that a firm will try to come up with new products and more efficient ways to produce products to earn monopoly profits.
Modern theories of growth that try to explain the origins of technological progress.
The period of time in which prices do not change or do not change very much.
A curve that shows the relationship between the level of prices and the quantity of real GDP demanded.
The ratio of the total shift in aggregate demand to the initial shift in aggregate demand.
The part of consumption spending that does not depend on income.
A vertical aggregate supply curve that represents the idea that in the long run, output is determined solely by the factors of production.
A relatively flat aggregate supply curve that represents the idea that prices do not change very much in the short run and that firms adjust production to meet demand.
A decrease in real output with increasing prices.
Changes in government taxes and spending that affect the level of GDP.
Policy actions taken to move the economy closer to full employment or potential output.
The spending programs that Congress authorizes on an annual basis.
Spending that Congress has authorized by prior law, primarily providing support for individuals.
A federal government program to provide retirement support and a host of other benefits.
A federal government health program for the elderly.
A federal and state government health program for the poor.
A school of thought that emphasizes the role that taxes play in the supply of output in the economy.
A relationship between the tax rates and tax revenues that illustrates that high tax rates could lead to lower tax revenues if economic activity is severely discouraged.
The amount by which government spending exceeds revenues in a given year.
The amount by which government revenues exceed government expenditures in a given year.
An estimate of a household’s long-run average level of income.
Any items that are regularly used in economic transactions or exchanges and accepted by buyers and sellers.
Any item that buyers give to sellers when they purchase goods and services.
The exchange of one good or service for another.
The problem in a system of barter that one person may not have what the other desires.
The property of money that holds that money preserves value until it is used in an exchange.
A monetary system in which gold backs up paper money.
A monetary system in which money has no intrinsic value but is backed by the government.
The sum of currency in the hands of the public, demand deposits, other checkable deposits, and traveler’s checks.
M1 plus other assets, including deposits in savings and loans accounts and money market mutual funds.
The sources of funds for a bank, including deposits and owners’ equity.
The uses of the funds of a bank, including loans and reserves.
The specific fraction of their deposits that banks are required by law to hold as reserves.
Any additional reserves that a bank holds above required reserves.
The ratio of the increase in total checking account deposits to an initial cash deposit.
A banker’s bank: an official bank that controls the supply of money in a country.
A central bank is the lender of last resort, the last place, all others having failed, from which banks in emergency situations can obtain loans.
The range of actions taken by the Federal Reserve to influence the level of GDP or inflation.
One of 12 regional banks that are an official part of the Federal Reserve System.
The group that decides on monetary policy: It consists of the seven members of the Board of Governors plus 5 of 12 regional bank presidents on a rotating basis.
The market for money in which the
amount supplied and the amount
demanded meet to determine the
nominal interest rate.
The demand for money based on
the desire to facilitate transactions.
P R I N C I P L E O F O P P O RT U N I T Y C O S T
The opportunity cost of something is what you sacrifice to get it.
R E A L - N O M I N A L P R I N C I P L E
What matters to people is the real value of money or income— its purchasing power—not the face value of money or income.
The demand for money that represents the needs and desires individuals and firms have to make transactions on short notice without incurring excessive costs.
The demand for money that arises because holding money over short periods is less risky than holding
stocks or bonds.
The purchase or sale of U.S.government securities by the Fed
The Fed’s purchase of government
bonds from the private sector.
The Fed’s sale of government bonds to the private sector.
CHANGING RESERVE REQUIREMENTS
If the Fed wishes to increase the supply of money, it can reduce banks’ reserve requirements so they have more money to loan out.
The market in which banks borrow and lend reserves to and from one another.
The rate at which currencies trade for one another in the market.
A decrease in the value of a currency.
An increase in the value of a currency.
shows how production of goods and services generates income for households and how households purchase goods and services produced by firms
Households - ultimate owners of firms, provide them capital
Firms - transform resources into products, supply gods an services that households demand in product markets
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