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29 Cards in this Set
- Front
- Back
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nominal output
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: production of goods and services valued at the current price
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real output
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What would be value of goods and services this year if we valued these goods and services at prices that prevailed in some specific year in the past? Valued at constant price-factoring in inflation
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CPI
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(price of basket of goods and services in current year) / (price of basket in base year)
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-leading indicatiors
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-where going to be in the future
stock market prices -average work week -new orders for consumer goods -vendor performance -index of consumer expectations -new orders for capital goods -building permits -interest rate spread |
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lagging
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unemployment
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primary sources of revenue and expenditures at the federal level
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-government borrow $ by selling bonds- open market operations
-revenue-taxes -spending- infrastructure |
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-cyclical unemployment:
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year to year fluctuations in unemployment around the natural rate
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structural unemployment
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caused by economic structuring making some skills obsolete
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frictional unemployment
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in between jobs
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seasonal:
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predicted or recur periodically
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labor force participation rate
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-ration of civilian labor force to population age 16+
-(labor force/ adult population) x 100 |
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unemployment rate
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(unemployed/those able to work)
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classical growth theory
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focuses on how diminishing marginal productivity of labor would limit growth
more capital, faster economy grows |
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New growth theory
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emphasized role technology in growth process
-starts with diminishing productivity of labor -tech advance—investment—future technological advance—growth |
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CPI
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a measure of the overall cost of goods and services bought by a typical consumer: (price of basket of goods and services in current year) / (price of basket in base year)
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PPI
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measure of the cost of a basket of goods and services bought by a firm
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Inflation rate
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the percentage change in the price index from the preceding period
-Inflation rate in year 2= (CPI in year 2- CPI in year 1)/ (CPI in year 1) x 100 |
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Deficit
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excess of government spending over tax revenue
-finance through borrowing in the bond market |
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debt
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accumulation of past government borrowing
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M1
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demand deposits, travelers checks, other checkable deposits ($605 billion), Currency
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M2
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Savings deposits, small time deposits, money market mutual funds, a few minor categories + everything in M1
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National savings
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total income in the economy that remails after paying for consumptions and government purchases
-Savings= investment -S=Y-C-G (savings= GDP-consumption-government purchases) |
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Private savings
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the income that households have left after paying for taxes and consumption
-Y-T-C (private savings= savings-tax revenue- consumption) |
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Public savings
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the tax revenue that the government has left after paying for its spending
-(T-G) Public savings= taxes- government spending -If T exceeds G, there is a budget surplus because it receives more money than it spends |
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Savings
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: when income exceeds consumption: investor
-spending on capital equipment, inventories, and structures, including household purchases of new housing -S=I |
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Quantity of Money
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-open market operations
-buying and selling -printing money |
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economies of scale
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goods that can be produced at low cost only if they are produced in large quantities
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diminishing marginal returns
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the benefit from an extra unit of an input declines as the quantity of the input increases
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T accounts
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Simplified accounting statement that shows changes in the bank’s assets and liabilities
-Assets Liabilities reserves ($100) Deposits ($100) -when banks hold only a fraction of deposits in reserve, banks create money |
