Chapter 8 Flashcards
(21 cards)
Business cycle
Alternating periods of economic expansion and economic recession
Consumption
Spending by households on goods and services, not including spending on new houses.
Economic growth
The ability of an economy to produce increasing quantities of goods and services
Expansion
The period of a business cycle during which total production and total employment are increasing
Final good or service
A good or service purchased by a final user
GDP deflator
A measure of the price level calculated by dividing nominal GDP by real GDP and multiplying by 100
Government purchases
Spending by federal, state, and local governments on goods and services
Gross domestic product (GDP)
The market value of all final goods and services produced in a country during a period of time, typically one year.
Inflation rate
The percentage increase in the price level from one year to the next
Intermediate good or service
A good or service that is an input into another good or service, such as a tire on a truck
Investment
Spending by firms on new factories, office buildings, machinery, and additions to inventories, plus spending by households and firms on new houses.
Macroeconomics
The study of the economy as a whole, including topics such as inflation, unemployment, and economic growth
Microeconomics
The study of how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices.
Net exports
Exports minus imports
Nominal GDP
The value of final goods and services evaluated at current-year prices.
Price level
A measure of the average prices of goods and services in the economy
Real GDP
The value of final goods and services evaluated at base-year prices.
Recession
The period of a business cycle during which total production and total employment are decreasing
Transfer payments
Payments by the government to households for which the government does not receive a new good or service in return.
Underground economy (or shadow economy)
Buying and selling of goods and services that is concealed from the government to avoid taxes or regulations or because the goods and services are illegal.
Value added
The market value a firm adds to a product
