Econ Unit 3

GDP

the total market value of all final goods and services produced within a country within a given period of time

Y= C= I= G= NX=

GDP, consumption, investment, government purchases, net exports

GPD per capita

a measure of a country's economic output that accounts for its number of people. It divides the country's GDP by its total population

Peak

the height of an economic expansion, when real GDP stops rising

Recession

period of reduced economic activity

Trough

Lowest point of a wave

expansion

A period of economic growth as measured by a rise in real GDP

frictional unemployment

unemployment that occurs when people take time to find a job

structural unemployment

unemployment resulting from industrial reorganization, typically due to technological change, rather than fluctuations in supply or demand.

cyclical unemployment

unemployment that rises during economic downturns and falls when the economy improves

seasonal unemployment

unemployment that occurs as a result of harvest schedules or vacations, or when industries slow or shut down for a season

progressive tax

A tax for which the percentage of income paid in taxes increases as income increases

proportional tax

A tax in which the average tax rate is the same at all income levels.

regressive tax

A tax for which the percentage of income paid in taxes decreases as income increases

Ability to pay

principle of taxation based on belief that taxes should be paid according to level of income regardless of benefits received

benefits received

A concept of tax fairness that states that people should pay taxes in proportion to the benefits they receive from government goods and services.

budget deficit

a shortfall of tax revenue from government spending

budget surplus

an excess of tax revenue over government spending

fiscal policy

Government policy that attempts to manage the economy by controlling taxing and spending. Managed by president and congress

monetary policy

Government policy that attempts to manage the economy by controlling the money supply and thus interest rates. Managed by the FEDS

national debt

the total amount of money that a country's government has borrowed, by various means.

The Central bank of America is called

The federal reserve

expansionary policy

a fiscal policy used to encourage economic growth, often through increased spending or tax cuts

contractionary policy

a fiscal policy used to reduce economic growth, often through decreased spending or higher taxes

Protectionism

Economic policy of shielding an economy from imports.

Imports Quotas

limits on the number of a product that can be imported

exchange rate

The measure of how much one currency is worth in relation to another.

trade deficit

An excess of imports over exports

trade surplus

when a country exports more than it imports

strong dollar

the value of the dollar is more than that of other countries, foreign goods are less expensive

weak dollar

the value of the dollar is less than that of other countries, foreign goods are more expensive

what goods should a country export

If countries specialize and make the goods, they have comparative advantage in, then trade and the world ends up with more

absolute advantage

the ability to produce a good using fewer inputs than another producer