AP Macro Unit 2

Total market value of all final goods and services produced annually within a country

Frictional + Structural + Cyclical

Frictional + Structural

Products purchased for final use and not resale

Products purchased for resale or further manufacturing

Wrongly including the value of intermediate goods

Amount households spend for goods and services

Spending for the production and accumulation of capital, additions to inventories, and new construction

The expenditures of all governments (federal, state, and local) in the economy for all goods and services

Exports minus imports (X-M)

Not adjusted for inflation

Adjusted for inflation

Number which shows how the weighted average price of selected goods and services changes through time

Number which measures the prices of a fixed market basket of 300+ goods and services bought by a typical consumer

Recurring increases and decreases in the level of economic activity over periods of years

Declining real GDP, lower real income, higher unemployment

Increasing real GDP, higher real income, lower unemployment

Percentage of the labor force unemployed at any time

Type of unemployment caused by temporary layoffs and workers voluntarily changing jobs

The full unemployment and employment rate when the economy is achieving potential output. No cyclical unemployment, only frictional and structural

Unemployment of workers whose skills are not in demand, who lack skills to obtain employment, are unable to move to places where there are jobs available, or have their jobs replaced by technological advances.

A type of unemployment caused by insufficient total spending or recession.

Amount society could produce when it fully employs its available resources. On PPC line. L, L, C, E

Employees who have left the labor force because they have been unable to find employment.

Statement that summarizes an economy’s transactions with the rest of the world for a specified time period

Part of Balance of Payments that includes asset purchases of stocks, bonds, real estate, investment in factories, and currency

Part of Balance of Payments that includes exports, imports, dividends and interest, and transfer payments

A rise in the general level of prices in an economy

The number of years it will take for some measure to double (only applies to positive growth)

Inflation caused by there being more demand than there is output and the existing price level. Demand > output

Inflation resulting from an increase in resource costs (labor, capital, land, etc) which leads to an increase in per unit production costs.

Increases in the price level which occur at the expected rate

Increases in the price level which occur at greater rate than expected

Automatic increase in the incomes of workers or pensions when inflation occurs

Output per worker; must increase for economic growth

Reduction in an economy’s price level

Households sell

Firms buy inputs

Goods and services are sold by firms

Goods and services are bought by households

Government spending is greater than tax revenue

G > T

Government spending is less than tax revenue

G < T

Government spending is equal to tax revenue

G = T

Outward shift in PPC, increase in real output (GDP) or real GDP per Capita

Current production in current year prices / current production in base year prices

Roughly equal to GDP in the circular flow of money

(Nominal GDP / Real GDP) x 100

(Nominal GDP / Price index) = Real GDP

GDP / Population

Improvement in labor created by education and knowledge

C+I+G+(X-M)

((price level yr 2 / price level year 1) / price level year 1) x 100

((price index yr 2 / price index year 1) / price index year 1) x 100

Nominal interest rate - rate of inflation = real interest rate

(Cost of market basket / base cost of market basket) x 100

Taxes go up

Government spending goes down

During an expansion

Taxes go down

Government spending goes up

During a recession

Real GDP / # of people working

Zero

Number of years for variable to double = (72 / annual growth rate of variable)

W+P+I+R