Macro Exam 1

Front 1

Price Level

Back 1

A weighted average of the prices of all goods and services.

Front 2

Price Index

Back 2

A measure of the price level.

Front 3

Consumer Price Index (CPI)

Back 3

The weighted average of prices of a specific set of goods and services purchased by a typical household.

Front 4

Base Year

Back 4

A benchmark year that serves as a basis of comparison for prices in other years.

Front 5

Inflation

Back 5

An increase in the price level and is usually measured on an annual basis.

Front 6

Inflation Rate

Back 6

The positive percentage change in the price level on an annual basis.

Front 7

Real Income

Back 7

Nominal income adjusted for price changes.

Front 8

Nominal Income

Back 8

The current dollar amount of a person's income.

Front 9

Unemployment Rate

Back 9

# of unemployed persons/civilian labor force

Front 10

Employment Rate

Back 10

# of employed persons/civilian non institutional population

Front 11

Labor Force Participation Rate (LFPR)

Back 11

civilian labor force/civilian non institutional population

Front 12

Frictional Unemployment

Back 12

Unemployment that is due to the natural frictions in the economy and that is caused by changing market conditions and represented by qualified individuals with transferable skills who change jobs.

Front 13

Structural Unemployment

Back 13

Unemployment due to structural changes in the economy that eliminate some jobs and create others for which the unemployed are unqualified.

Front 14

Natural Unemployment

Back 14

Adding the frictional unemployment rate and the structural unemployment rate.

Front 15

Full Employment

Back 15

When the economy is operating at its natural unemployment rate.

Front 16

Cyclical Unemployment Rate

Back 16

The difference between the existing unemployment rate and the natural unemployment rate.

Front 17

Gross Domestic Product (GDP)

Back 17

The total market value of all final goods and services produced annually within a country's borders.

Front 18

Final Good

Back 18

A good in the hands of the final user, the ultimate consumer.

Front 19

Intermediate Good

Back 19

An input to the production of a good.

Front 20

Double Counting

Back 20

Refers to counting a good more than once when computing GDP.

Front 21

Transfer Payment

Back 21

A payment to a person that is not made in return for goods and services currently supplied.

Front 22

Consumption

Back 22

The sum of spending on durable goods, nondurable goods, and services.

Front 23

Investment

Back 23

The sum of all purchases of newly produced capital goods, changes in business inventories, and purchases of new residential housing.

Front 24

Inventory Investment

Back 24

Changes in the stock of unsold goods.

Front 25

Fixed Investment

Back 25

Business purchases of capital goods, such as machinery and factories, and purchases of new residential housing.

Front 26

Government Purchases

Back 26

Federal, state, and local government purchases of goods and services and gross investment in highways, bridges, and so on.

Front 27

Government Transfer Payments

Back 27

Payments to persons that are not made in return for currently supplied goods and services.

Front 28

Imports

Back 28

Toal domestic spending on foreign goods.

Front 29

Exports

Back 29

Toal foreign spending on domestic goods.

Front 30

Net Exports

Back 30

Exports minus imports.

Front 31

National Income

Back 31

Total income earned by U.S. citizens and businesses, no matter where they reside or are located; the sum of the payments to resources (land, labor, capital, and entrepreneurship).

Front 32

Capital Consumption Allowance (Depreciation)

Back 32

The cost to replace capital goods used up in production through natural wear, obsolescence, and accidental destruction.

Front 33

Net Domestic Product (NDP)

Back 33

GDP minus the capital consumption allowance.

Front 34

Personal Income

Back 34

The amount of income that individuals actually receive.

Front 35

Disposable Income

Back 35

The portion of personal income that can be used for consumption or saving.

Front 36

Real GDP

Back 36

The value of the entire output produced annually within a country's borders, adjusted for price changes.

Front 37

Economic Growth

Back 37

Increases in real GDP.

Front 38

Business Cycle

Back 38

Recurrent swings (up and down) in real GDP.

Front 39

Aggregate Demand

Back 39

The quantity demanded of all goods and services (real GDP) at different price levels, ceteris paribus.

Front 40

Aggregate Demand (AD) Curve

Back 40

A curve that shows the quantity demanded of all goods and services (real GDP) at different price levels, ceteris paribus.

Front 41

Real Balance Effect

Back 41

The change in the purchasing power of dollar-denominated assets that results from a change in the price level.

Front 42

Monetary Wealth

Back 42

The value of a person's monetary assets.

Front 43

Purchasing Power

Back 43

The quantity of goods and services that can be purchased with a unit of money.

Front 44

Interest Rate Effect

Back 44

The changes in household and business buying as the interest rate changes.

Front 45

International Trade Effect

Back 45

The change in foreign sector spending as the price level changes.

Front 46

Wealth

Back 46

The value of all assets owned, both monetary and non monetary.

Front 47

Exchange Rate

Back 47

The price of one currency in terms of another currency.

Front 48

Appreciation

Back 48

An increase in the value of one currency relative to other currencies.

Front 49

Depreciation

Back 49

A decrease in the value of one currency relative to other currencies.

Front 50

Velocity

Back 50

The average number of times a dollar is spent to buy final goods and services in a year.

Front 51

Aggregate Supply

Back 51

The quantity supplied of all goods and services (real GDP) at different price levels, ceteris paribus.

Front 52

Short-Run Aggregate Supply (SRAS) Curve

Back 52

A curve that shows the quantity supplied of all goods and services (real GDP) at different price levels, ceteris paribus.

Front 53

Short-Run Equilibrium

Back 53

The condition in the economy when the quantity demanded of real GDP equals the (short-run) quantity supplied of real GDP. This condition is met where the aggregate demand curve intersects the short-run aggregate supply curve.

Front 54

Natural Real GDP

Back 54

The real GDP that is produced at the natural unemployment rate. The real GDP that is produced when the economy is in long-run equilibrium.

Front 55

Long-Run Aggregate Supply (LRAS) Curve

Back 55

The LRAS curve is a vertical line at the level of natural real GDP. It represents the output the economy produces when wages and prices have adjusted to their final equilibrium levels and when workers do not have any relevant misperceptions.