10 Points: (x2)
-http://quizlet.com/78355757/economics-unit-5-flash-cards/
-Unit 5 Vocabulary
Chapter 12 – GDP & Growth
National income accounting
A system that collects macroeconomic statistics on production, income, investment, and savings
Example: looks at the whole U.S.
NIPA
National Income and Product Accounts, which are maintained by the US department of Commerce
Example: NIPA of Apple
Gross Domestic Product
The dollar value of all final goods and services produced within a country's borders in a given year
Example: GDP of USA
Expenditure approach to GDP calculation
First, economists estimate the annual expenditures, or amounts spent, on four categories of final goods and services
Example: calculating GDP of Spain
Income approach to GDP calculation
Calculates GDP by adding up all the incomes in the economy
Example: calculating GDP of England
Gross National Product
The annual income earned by U.S.-owned firms and U.S. citizens
Example: All of the income earned in the US
Net national product
GNP minus the cost of depreciation of capital equipment
Example: GNP minus the cost of fixing park benches
National income
What we get after subtracting sales and excise taxes and making some other minor adjustments to NNP
Example: US NNP minus the taxes
Personal income
How much pretax income businesses actually pay to U.S. households after reinvesting some of their income and paying additional taxes
Example: The amount businesses pay to stockholders
Intermediate goods
Goods used in the production of final goods
Example: Machines
Final goods
Goods sold
Example: blankets
Durable goods
Goods that last for a relatively long time, such as refrigerators, cars, and DVD players
Example: Freezers
Nondurable goods
Goods that last a short period of time, such as food, light bulbs, and sneakers
Example: candles
Nominal GDP
GDP measured in current prices
Example: current prices of all US goods
Real GDP
GDP expressed in constant, or unchanging, prices
Example: GDP converted to be the same units from all time periods
Depreciation
The loss of the value of capital equipment results from normal wear and tear
Example: benches breaking from wood rotting in the rain
Price level
The average of all prices in the economy
Example: all prices added together and divided by the number
Aggregate Supply
The total amount of goods and services in the economy available at all possible price levels
Example: total of all things available
Aggregate Demand
The amount of goods and services in the economy that will be purchased at all possible price levels
Example: Total amount of all things that will be sold
Business Cycle
A period of macroeconomic expansion followed by a period of contraction
Example: Apple selling a ton of computers then not so many
Expansion
A period of economic growth as measured by a rise in real GDP
Example: Apple selling more computers than the last month
Peak
The height of an economic expansion, when real GDP stops rising
Example: When Apple has reached its peak in computer sales
Contraction
A period of economic decline marked by falling real GDP
Example: Apple not selling as many computers this month as last month
Trough
The lowest point in an economic contraction, when real GDP stops falling
Example: When Apple didn't sell hardly any computers and started selling them again
Economic growth
A steady, long-term increase in real GDP
Example: A country doing really well in the economy
Recession
A prolonged economic contraction
Example: the recession in 2008
Depression
A recession that is especially long and severe
Example: The Great Depression in 1930s
Stagflation
A decline in real GDP combined with a rise in the price level
Example: If there was inflation and then the purchasing of goods went down
4 Variables affecting Business Cycle:
–Business Investment,
When the economy is expanding, firms expect sales and profits to keep rising and therefor may incest heavily in new plants and equipment
Example: Apple hearing that economy is getting better and making more computers
-Interest Rates & Credit,
The cost of credit is the interest rate that financial institutions charge their customers. If the interest rate rises, consumers are less likely to buy those new cars and appliances.
Example: If the interest for buying Ford goes up not as many people will buy it
-Consumer Expectations,
Fears of a weakening economy can cause consumer confidence to fall, meaning that a majority of people expect the economy to begin contracting
Example: A family thinks the economy is going to get bad so they decide to save their money instead of spend it
-External Shocks
Dramatically affect an economy's aggregate supply
Example: disruption of the oil supply
Leading Indicators
Key economic variables that economists use to predict a new phase of a business cycle
Example: the stock market
Real GDP per capita
Real GDP divided by the total population
Example: USA's GDP divided by the number of people living in the US
Capital deepening
Process of increasing the amount of capital per worker
Example: When the labor force can do more
Saving
Income not used for consumption
Example: investment
Savings rate
The proportion of disposable income that is saved
Example: the amount in someone's bank account
GDP & Quality of Life
A higher GDP will usually indicate a better quality of life
GNH – Gross National Happiness
The happiness of people with considerations of the amount of people in the country
Example: 100 happy people and 100 unhappy people = 50% GNH
Effects of Population Growth,
doesn't necessarily preclude economic growth. However, if the population grows while the supply of capital remains constant, the amount of capital per worker will shrink
Example: 50 people moving to the country but not increasing productivity
-Government,
Can affect the process of capital deepening in several ways
Example: if the government raises taxes, households will have less money
-Foreign Trade,
Can result in trade deficit, a situation in which the value of goods a country imports is higher than the value it exports
Example: America
-& Technological Progress on economic growth
An increase in efficiency gained by producing more output without using more inputs
Example: the cotton gin
Chapter 13 – Economic Challenges
Frictional Unemployment
unemployment that occurs when people take time to find a job
Example: trying to find the right job after law school
Seasonal Unemployment
Unemployment that occurs as a result of harvest schedules or vacations, or when industries slow or shut down for a season
Example: Hyland ski and snowboard isn't running in the summer
Structural Unemployment & 5 Causes
Unemployment that occurs when workers' skills do not match the jobs that are available
Example: jobs requiring a college education but a person doesn't have that
Cyclical Unemployment
Unemployment that rises during economic downturns and falls when the economy improves
Example: companies having to lay people off because the economy isn't good
US Census Bureau & Bureau of Labor Statistics
Do an official count of the population and take data about it
Example: data on how many people are currently unemployed
Unemployment Rate
The percentage of the nation's labor force that is unemployed
Example: 7%
Full employment
The level of employment reached when there is no cyclical unemployment
Example: a stable job
Underemployment
Working at a job for which one is overqualified, or working part-time when full-time work is desired
Example: being a waiter when you have your teaching degree
Discouraged worker
A person who wants a job but has given up looking
Example: someone who has been unemployed for a very long time and can't find anything
Inflation
A general increase in prices
Example: every single good's price goes up
Purchasing power
The ability to purchase goods and services
Example: how much your money will buy
Price index
A measurement that shows how the average price of a standard group of goods changes over time
Example: a chart tracking the price of TVs
Consumer price index (CPI)
A price index determined by measuring the price of a standard group of goods meant to represent the "market basket" of a typical urban cusumer
Example: the typical things people in urban areas buy, like TVs and clothes
Market basket
A representative collection of goods and services
Example: TVs and clothes and computers and phones
Inflation rate
The percentage rate of change in price level over time
Example: 10%
Core inflation rate
The rate of inflation excluding the effects of food and energy prices
Example: inflation of only goods
Hyperinflation
Inflation that is out of control
Example: when money begins to have little to no value
Quantity theory
Theory that too much money in the economy causes inflation
Example: if the president decides to print a bunch of money
Demand-pull theory
Theory that inflation occurs when demand for goods and services exceeds existing supplies
Example: people need more milk but there isn't enough
Cost-push theory
Theory that inflation occurs when producers raise prices in order to meet increased costs
Example: Factories are charging more to produce backpacks so backpacks have to charge more money
Wage-price spiral
The process by which rising wages causes higher prices, and higher prices cause higher wages
Example: when the president decides to raise the minimum wage
Fixed income
income that does not increase even when prices go up
Example: if the minimum wage stayed the same but the prices of goods went up
Deflation
A sustained drop in the price level
Example: wages stay the same and companies realize that they can afford to lower the prices
Poverty Threshold
The income level below which income is insufficient to support a family or household
Example: a family of 4 making any income below $25,000
Poverty Rate
The percentage of people who live in households with income below the official poverty line
Example: 30%
Income distribution
How the nation's total income is distributed among its population
Example: the income is not distributed evenly in USA
Causes of Poverty
differences in skills and education, inheritances, and field of work
Food stamps
Government-issued coupons that recipients exchange for food
Example: a coupon for free food if you're under the poverty line
Lorenz Curve
The curve that illustrates income distribution
Enterprise zone
Area where companies can locate free of certain local, state, and federal taxes and restictions
Example: casinos
Welfare Reform –
-Employment Assistance,
The lack of an adequate income may result from inadequate skills or simply a lack of opportunity
-Block grant,
Federal funds given to the states in lump sums
-AFDC,
Aid to Families with Dependent Children
-TANF,
Temporary Assistance for Needy Families
-Workfare
A program requiring work in exchange for temporary assistance
Example: requiring a person receiving welfare checks to prove that they are deserving them
1 Point: (x5)
- This fascinating article relates the income gap in America to citizens health! It's interesting how big of an income gap there is and the impact that that has on people's lives. http://www.nytimes.com/2015/03/31/upshot/income-inequality-its-also-bad-for-your-health.html?ref=topics&_r=0
- This article about poverty tells an interesting fact that seems unknown to many people: majority of US public school students are in poverty. This really hits home to high school students because we can realize that people in our classes might be struggling in poverty. http://www.washingtonpost.com/local/education/majority-of-us-public-school-students-are-in-poverty/2015/01/15/df7171d0-9ce9-11e4-a7ee-526210d665b4_story.html
-This article kind of introduces the wage-spiral to readers as it reveals that wages have been significantly increasing recently which can only be followed by an increase in the prices of goods. http://articles.latimes.com/1989-04-26/business/fi-1883_1_food-costs-energy-and-food-producer-price
-This article reveals GDP from the perspective of a different country: China. It reveals the effects of exports and how that relates to the economy. Definitely worth the read! http://www.nytimes.com/2015/03/12/business/international/for-chinese-economy-steel-goes-from-strength-to-weakness.html?ref=topics
-This article talks about one of our vocabulary words: depreciation. It tells us readers about how the white house was addressing this issue in recent times and is a good read! http://articles.chicagotribune.com/2014-07-10/news/sns-rt-us-usa-tax-depreciation-20140710_1_bonus-depreciation-tax-code-republican-measure
-http://quizlet.com/78355757/economics-unit-5-flash-cards/
-Unit 5 Vocabulary
Chapter 12 – GDP & Growth
National income accounting
A system that collects macroeconomic statistics on production, income, investment, and savings
Example: looks at the whole U.S.
NIPA
National Income and Product Accounts, which are maintained by the US department of Commerce
Example: NIPA of Apple
Gross Domestic Product
The dollar value of all final goods and services produced within a country's borders in a given year
Example: GDP of USA
Expenditure approach to GDP calculation
First, economists estimate the annual expenditures, or amounts spent, on four categories of final goods and services
Example: calculating GDP of Spain
Income approach to GDP calculation
Calculates GDP by adding up all the incomes in the economy
Example: calculating GDP of England
Gross National Product
The annual income earned by U.S.-owned firms and U.S. citizens
Example: All of the income earned in the US
Net national product
GNP minus the cost of depreciation of capital equipment
Example: GNP minus the cost of fixing park benches
National income
What we get after subtracting sales and excise taxes and making some other minor adjustments to NNP
Example: US NNP minus the taxes
Personal income
How much pretax income businesses actually pay to U.S. households after reinvesting some of their income and paying additional taxes
Example: The amount businesses pay to stockholders
Intermediate goods
Goods used in the production of final goods
Example: Machines
Final goods
Goods sold
Example: blankets
Durable goods
Goods that last for a relatively long time, such as refrigerators, cars, and DVD players
Example: Freezers
Nondurable goods
Goods that last a short period of time, such as food, light bulbs, and sneakers
Example: candles
Nominal GDP
GDP measured in current prices
Example: current prices of all US goods
Real GDP
GDP expressed in constant, or unchanging, prices
Example: GDP converted to be the same units from all time periods
Depreciation
The loss of the value of capital equipment results from normal wear and tear
Example: benches breaking from wood rotting in the rain
Price level
The average of all prices in the economy
Example: all prices added together and divided by the number
Aggregate Supply
The total amount of goods and services in the economy available at all possible price levels
Example: total of all things available
Aggregate Demand
The amount of goods and services in the economy that will be purchased at all possible price levels
Example: Total amount of all things that will be sold
Business Cycle
A period of macroeconomic expansion followed by a period of contraction
Example: Apple selling a ton of computers then not so many
Expansion
A period of economic growth as measured by a rise in real GDP
Example: Apple selling more computers than the last month
Peak
The height of an economic expansion, when real GDP stops rising
Example: When Apple has reached its peak in computer sales
Contraction
A period of economic decline marked by falling real GDP
Example: Apple not selling as many computers this month as last month
Trough
The lowest point in an economic contraction, when real GDP stops falling
Example: When Apple didn't sell hardly any computers and started selling them again
Economic growth
A steady, long-term increase in real GDP
Example: A country doing really well in the economy
Recession
A prolonged economic contraction
Example: the recession in 2008
Depression
A recession that is especially long and severe
Example: The Great Depression in 1930s
Stagflation
A decline in real GDP combined with a rise in the price level
Example: If there was inflation and then the purchasing of goods went down
4 Variables affecting Business Cycle:
–Business Investment,
When the economy is expanding, firms expect sales and profits to keep rising and therefor may incest heavily in new plants and equipment
Example: Apple hearing that economy is getting better and making more computers
-Interest Rates & Credit,
The cost of credit is the interest rate that financial institutions charge their customers. If the interest rate rises, consumers are less likely to buy those new cars and appliances.
Example: If the interest for buying Ford goes up not as many people will buy it
-Consumer Expectations,
Fears of a weakening economy can cause consumer confidence to fall, meaning that a majority of people expect the economy to begin contracting
Example: A family thinks the economy is going to get bad so they decide to save their money instead of spend it
-External Shocks
Dramatically affect an economy's aggregate supply
Example: disruption of the oil supply
Leading Indicators
Key economic variables that economists use to predict a new phase of a business cycle
Example: the stock market
Real GDP per capita
Real GDP divided by the total population
Example: USA's GDP divided by the number of people living in the US
Capital deepening
Process of increasing the amount of capital per worker
Example: When the labor force can do more
Saving
Income not used for consumption
Example: investment
Savings rate
The proportion of disposable income that is saved
Example: the amount in someone's bank account
GDP & Quality of Life
A higher GDP will usually indicate a better quality of life
GNH – Gross National Happiness
The happiness of people with considerations of the amount of people in the country
Example: 100 happy people and 100 unhappy people = 50% GNH
Effects of Population Growth,
doesn't necessarily preclude economic growth. However, if the population grows while the supply of capital remains constant, the amount of capital per worker will shrink
Example: 50 people moving to the country but not increasing productivity
-Government,
Can affect the process of capital deepening in several ways
Example: if the government raises taxes, households will have less money
-Foreign Trade,
Can result in trade deficit, a situation in which the value of goods a country imports is higher than the value it exports
Example: America
-& Technological Progress on economic growth
An increase in efficiency gained by producing more output without using more inputs
Example: the cotton gin
Chapter 13 – Economic Challenges
Frictional Unemployment
unemployment that occurs when people take time to find a job
Example: trying to find the right job after law school
Seasonal Unemployment
Unemployment that occurs as a result of harvest schedules or vacations, or when industries slow or shut down for a season
Example: Hyland ski and snowboard isn't running in the summer
Structural Unemployment & 5 Causes
Unemployment that occurs when workers' skills do not match the jobs that are available
Example: jobs requiring a college education but a person doesn't have that
Cyclical Unemployment
Unemployment that rises during economic downturns and falls when the economy improves
Example: companies having to lay people off because the economy isn't good
US Census Bureau & Bureau of Labor Statistics
Do an official count of the population and take data about it
Example: data on how many people are currently unemployed
Unemployment Rate
The percentage of the nation's labor force that is unemployed
Example: 7%
Full employment
The level of employment reached when there is no cyclical unemployment
Example: a stable job
Underemployment
Working at a job for which one is overqualified, or working part-time when full-time work is desired
Example: being a waiter when you have your teaching degree
Discouraged worker
A person who wants a job but has given up looking
Example: someone who has been unemployed for a very long time and can't find anything
Inflation
A general increase in prices
Example: every single good's price goes up
Purchasing power
The ability to purchase goods and services
Example: how much your money will buy
Price index
A measurement that shows how the average price of a standard group of goods changes over time
Example: a chart tracking the price of TVs
Consumer price index (CPI)
A price index determined by measuring the price of a standard group of goods meant to represent the "market basket" of a typical urban cusumer
Example: the typical things people in urban areas buy, like TVs and clothes
Market basket
A representative collection of goods and services
Example: TVs and clothes and computers and phones
Inflation rate
The percentage rate of change in price level over time
Example: 10%
Core inflation rate
The rate of inflation excluding the effects of food and energy prices
Example: inflation of only goods
Hyperinflation
Inflation that is out of control
Example: when money begins to have little to no value
Quantity theory
Theory that too much money in the economy causes inflation
Example: if the president decides to print a bunch of money
Demand-pull theory
Theory that inflation occurs when demand for goods and services exceeds existing supplies
Example: people need more milk but there isn't enough
Cost-push theory
Theory that inflation occurs when producers raise prices in order to meet increased costs
Example: Factories are charging more to produce backpacks so backpacks have to charge more money
Wage-price spiral
The process by which rising wages causes higher prices, and higher prices cause higher wages
Example: when the president decides to raise the minimum wage
Fixed income
income that does not increase even when prices go up
Example: if the minimum wage stayed the same but the prices of goods went up
Deflation
A sustained drop in the price level
Example: wages stay the same and companies realize that they can afford to lower the prices
Poverty Threshold
The income level below which income is insufficient to support a family or household
Example: a family of 4 making any income below $25,000
Poverty Rate
The percentage of people who live in households with income below the official poverty line
Example: 30%
Income distribution
How the nation's total income is distributed among its population
Example: the income is not distributed evenly in USA
Causes of Poverty
differences in skills and education, inheritances, and field of work
Food stamps
Government-issued coupons that recipients exchange for food
Example: a coupon for free food if you're under the poverty line
Lorenz Curve
The curve that illustrates income distribution
Enterprise zone
Area where companies can locate free of certain local, state, and federal taxes and restictions
Example: casinos
Welfare Reform –
-Employment Assistance,
The lack of an adequate income may result from inadequate skills or simply a lack of opportunity
-Block grant,
Federal funds given to the states in lump sums
-AFDC,
Aid to Families with Dependent Children
-TANF,
Temporary Assistance for Needy Families
-Workfare
A program requiring work in exchange for temporary assistance
Example: requiring a person receiving welfare checks to prove that they are deserving them
1 Point: (x5)
- This fascinating article relates the income gap in America to citizens health! It's interesting how big of an income gap there is and the impact that that has on people's lives. http://www.nytimes.com/2015/03/31/upshot/income-inequality-its-also-bad-for-your-health.html?ref=topics&_r=0
- This article about poverty tells an interesting fact that seems unknown to many people: majority of US public school students are in poverty. This really hits home to high school students because we can realize that people in our classes might be struggling in poverty. http://www.washingtonpost.com/local/education/majority-of-us-public-school-students-are-in-poverty/2015/01/15/df7171d0-9ce9-11e4-a7ee-526210d665b4_story.html
-This article kind of introduces the wage-spiral to readers as it reveals that wages have been significantly increasing recently which can only be followed by an increase in the prices of goods. http://articles.latimes.com/1989-04-26/business/fi-1883_1_food-costs-energy-and-food-producer-price
-This article reveals GDP from the perspective of a different country: China. It reveals the effects of exports and how that relates to the economy. Definitely worth the read! http://www.nytimes.com/2015/03/12/business/international/for-chinese-economy-steel-goes-from-strength-to-weakness.html?ref=topics
-This article talks about one of our vocabulary words: depreciation. It tells us readers about how the white house was addressing this issue in recent times and is a good read! http://articles.chicagotribune.com/2014-07-10/news/sns-rt-us-usa-tax-depreciation-20140710_1_bonus-depreciation-tax-code-republican-measure