Chapter 6 | The Macroeconomic Perspective

Question 1

business cycle

Answer 1

the economy’s relatively short-term movement in and out of recession

Question 2

depreciation

Answer 2

the process by which capital ages over time and therefore loses its value

Question 3

depression

Answer 3

an especially lengthy and deep decline in output

Question 4

double counting

Answer 4

a potential mistake to avoid in measuring GDP, in which output is counted more than once as it travels through the stages of production

Question 5

durable good

Answer 5

long-lasting good like a car or a refrigerator

Question 6

exchange rate

Answer 6

the price of one currency in terms of another currency

Question 7

final good and service

Answer 7

output used directly for consumption, investment, government, and trade purposes; contrast with “intermediate good”

Question 8

GDP per capita

Answer 8

GDP divided by the population

Question 9

gross domestic product (GDP)

Answer 9

the value of the output of all goods and services produced within a country in a year

Question 10

gross national product (GNP)

Answer 10

includes what is produced domestically and what is produced by domestic labor and business abroad in a year

Question 11

intermediate good

Answer 11

output provided to other businesses at an intermediate stage of production, not for final users; contrast with “final good and service”

Question 12

inventory

Answer 12

good that has been produced, but not yet been sold

Question 13

national income

Answer 13

includes all income earned: wages, profits, rent, and profit income

Question 14

net national product (NNP)

Answer 14

GDP minus depreciation

Question 15

nominal value

Answer 15

the economic statistic actually announced at that time, not adjusted for inflation; contrast with real value

Question 16

nondurable good

Answer 16

short-lived good like food and clothing

Question 17

peak

Answer 17

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

Question 18

real value

Answer 18

an economic statistic after it has been adjusted for inflation; contrast with nominal value

Question 19

recession

Answer 19

a significant decline in national output

Question 20

service

Answer 20

product which is intangible (in contrast to goods) such as entertainment, healthcare, or education

Question 21

standard of living

Answer 21

all elements that affect people’s happiness, whether people buy or sell these elements in the market or not

Question 22

structure

Answer 22

building used as residence, factory, office building, retail store, or for other purposes

Question 23

trade balance

Answer 23

gap between exports and imports

Question 24

trade deficit

Answer 24

exists when a nation’s imports exceed its exports and it calculates them as imports –exports

Question 25

trade surplus

Answer 25

exists when a nation’s exports exceed its imports and it calculates them as exports – imports