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25 Cards in this Set
- Front
- Back
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Nominal National Income
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total national income measured in current dollars. Also called current-dollar national income.
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Real National Income
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National income measured in constant (base-period) dollars. It changes only when quantities change.
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Recession
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a fall in the level of real GDP. Often defined precisely as two consecutive quarters in which real GDP falls.
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Business Cycle
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fluctuations of national income around its trend value that follow a more or less wavelike pattern.
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Potential Output (Y*)
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the real GDP that the economy would produce if its productive resources were fully employed. Also called potential GDP.
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Output Gap
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actual output minus potential output, Y-Y*.
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Recessionary Gap
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a situation in which actual output is less than potential output, Y<Y*.
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Inflationary Gap
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a situation in which actual output exceeds potential output, Y>Y*.
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Employment
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the number of persons 15 years of age or older who have jobs.
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Unemployment
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the number of persons 15 years of age or older who are not employed and are actively searching for a job.
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Labour Force
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the number of persons employed plus the number of persons unemployed.
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Unemployment Rate
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unemployment expressed as a percentage of the labour force.
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Labour Productivity
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the level of real GDP divided by the level of employment (or total hours worked).
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Price Level
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the average level of all prices in the economy, expressed as an index number.
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Inflation
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a rise in the average level of all prices (the price level).
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Consumer Price Index (CPI)
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an index of the average prices of goods and services commonly bought by households.
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Purchasing Power of Money
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the amount of goods and services that can be purchased with a unit of money.
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Interest Rate
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the price paid per dollar borrowed per period of time, expressed either as a proportion (ex. 0.06) or as a percentage (ex. 6%)
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Normal Interest Rate
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the price paid per dollar borrowed per period of time.
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Real Interest Rate
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the nominal rate of interest adjusted for the change in purchasing power of money. Equal to the nominal interest rate minus the rate of inflation.
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Exchange Rate
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the number of units of domestic currency required to purchase one unit of foreign currency.
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Foreign Exchange
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foreign currencies that are traded on the foreign-exchange market.
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Foreign-Exchange Market
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the market in which different national currencies are traded.
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Deprecation
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a rise in the exchange rate-it takes more units of domestic currency to purchase one unit of foreign currency.
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Appreciation
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a fall in the exchange rate- it takes fewer units of domestic currency to purchase one unit of foreign currency.
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