Macroeconomics

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gross domestic product (GDP)

Back 1

The value of the output of all goods and services produced within a country.

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trade balance

Back 2

Gap between exports and imports.

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trade surplus

Back 3

When exports exceed imports.

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trade deficit

Back 4

When imports exceed exports

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durable goods

Back 5

Long-lasting goods like cars and refrigerators.

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nondurable goods

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Short-lived goods like food and clothing

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nventories

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Goods that have been produced, but not yet been sold.

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double counting

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A potential mistake to be avoided in measuring GDP, in which output is counted two or more times as it travels through the stages of production

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final goods and services

Back 9

Output used directly for consumption, investment, government, and trade purposes; contrast with “intermediate goods.”

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intermediate goods and services

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Output provided to other businesses at an intermediate stage of production, not for final users; contrast with “final goods and services.”

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exchange rate

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The rate at which one currency exchanges for another

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per capita GDP

Back 12

GDP divided by the population

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recession

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A significant decline in national output.

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depression

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An especially lengthy and deep decline in output.

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peak

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During the business cycle, the highest point of output before a recession begins.

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trough

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During the business cycle, the lowest point of output in a recession, before a recovery begins.

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business cycle

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The relatively short-term movement of the economy in and out of recession.

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convergence

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When economies with low per capita incomes are growing faster than economies with high per capita incomes.

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capital deepening

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When an economy has a higher average level of physical and/or human capital per person.

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technology

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All the ways in which a certain level of capital investment can produce a greater quantity or higher quality, as well as different and altogether new products.

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human capital:

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The skills and education of workers.

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physical capital

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The plant and equipment used by firms in production.

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aggregate production function:

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The process of an economy as a whole turning economic inputs like labor, machinery, and raw materials into outputs like goods and services used by consumers.

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production function

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The process of a firm turning economic inputs like labor, machinery, and raw materials into outputs like goods and services used by consumers.

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productivity

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The value of what is produced per worker or per hour worked.

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Industrial Revolution

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The widespread use of power-driven machinery and the economic and social changes that occurred in the first half of the 1800s.

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out of the labor force

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Those who do not have a job and are not looking for a job.

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unemployment rate

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The percentage of adults who are in the labor force and thus seeking jobs, but who do not have jobs.

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implicit contract

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An unwritten agreement in the labor market that the employer will try to keep wages from falling when the economy is weak or the business is having trouble, and the employee will not expect huge salary increases when the economy or the business is strong.

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efficiency wage theory

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The theory that the productivity of workers, either individually or as a group, will increase if they are paid more.

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insider-outsider model

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A model that divides workers into “insiders” already working for the firm who know the procedures and “outsiders” who are recent or prospective hires.

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cyclical unemployment

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Unemployment closely tied to the business cycle, like higher unemployment during a recession.

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natural rate of unemployment

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The unemployment rate that would exist in a growing and healthy economy from the combination of economic, social, and political factors that exist at a time.

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frictional unemployment

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Unemployment that occurs as workers move between jobs.