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32 Cards in this Set

  • Front
  • Back
Determination by consumers of the types and quantities of goods and services that will be produced with the scarce resources of the economy; consumers' direction of production through their dollar votes.
Consumer Sovereignty
The tendency of firms and resource suppliers that seek to further their own self-interests in competitive markets to also promote the interest of society.
Invisible Hand
The use of the resources of an individual, a firm, a region, or a nation to concentrate production on one or a small number of goods and services.
Employees who have left the labor foce because they have not been able to find employment.
Discouraged Workers
The generalizatioin that any 1-percentage-point rise in the unemployment rate above the full-employment unemployment rate will increase the GDP gap by 2 percent of the potential output (GDP) of the economy.
Okun's Law
Recurring increases and decreases in the level of economic activity over periods of years; consists of peak, recession, trough, and recovery phases.
Business Cycle
The total market value of all final goods and services produced annually within the boundaries of the United States, whether by U.S. or foreign-supplied resources.
Gross Domestic Product (GDP)
A long-term tendency; a change in some variable over a very long period of years.
Secular Trend
A type of unemployment caused by workers voluntarily changing jobs and by temporary layoffs; unemployed workers between jobs.
Frictional Unemployment
Unemployment of workers whose skills are not demanded by employers, who lack sufficient skill to obtain employment, or who cannot easily move to locations where jobs are available.
Structural Unemployment
A type of unemployment caused by insufficient total spending (or by insufficient aggregate demand).
Cyclical Unemployment
The percentage of the labor force unemployed at any time.
Unemployment Rate
The full-employment unemployment rate; the unemployment rate occurring when there is no cyclical unemployment and the economy is achieving its potential output; the unemployment rate at which actual inflation equals expected inflation.
Natural Rate of Unemployment
Persons 16 years og age and older who are not in stitutions and who are employed or are unemployed and seeking work.
Labor Force
Actual gross domestic product minus potential output; may be either a positive amount (a positive GDP gap) or a negative amount (a negative GDP gap).
A rise in the general level of prices in an economy.
The number of dollars received by an individual or group for its resources during some period of time.
Nominal Income
The amount of goods and services that can be purchased with nominal income during some period of time; nominal income adjusted for inflation.
Real Income
The amount of money received by a worker per unit of time (hour, day, etc.); money wage.
Nominal Wage
The amount of goods and services a worker can purchase with his or her nominal wage; the purchasing power of the nominal wage.
Real Wage
The interest rate expressed in dollars of constant value (adjusted for inflation) and equal to the nominal interest rate less the expected rate of inflation.
Real Interest Rate
The interest rate expressed in terms of annual amounts currently charged for interest and not adjusted for inflation.
Nominal Interest Rate
A decline in the economy's price level.
A very rapid rise in the price level; an extremely high rate of inflation.
A ratio- the labor force divided by the number of persons in the population expressed as a percentage.
Labor Force Participation Rate
What is the Real GDP Growth Rate Formula?
GDP2-GDP1/GDP1 X 100
What is the Real GDP Per Capita Growth Rate Formular?
Real Per Capita GDP2-Real Percapita GDP1/Real Per Capita GDP1 X 100
What size firms do durable goods usually have?
Small # of large firms (which equal to price wars)
What size firms do non-durable good have?
Many small firms; necessities such as food
What is the Unemployment Rate Formula?
Unemployment Rate = Official Unemployment/Labor Force X 100
Structural unemployment is due to deep changes in the demand for labor. It is the result of what?
-"Downsizes" & mergerers
-Technological changes
-Changes in the geographic distribution of jobs
-Capital flight & outsourcing
What is the Rate of Inflation ratio formula?
Rate of Inflation = Current Year Price Index-Prior Year Price Index/Prior Year Price Index X 100