Economics chapter 12-16 – Flashcards
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Gross domestic product (GDP)
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the dollar value of all final goods and services produced within a country's borders in a given year
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Nominal GDP
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GDP measured in current prices
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Real GDP
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GDP expressed in constant, or unchanging, prices
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Gross national product (GNP)
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the annual income earned by US owned firms and US citizens a measure of the market value of all goods and services produced by Americans in one year
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Depreciation
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the loss of the value of capital equipment that results from normal wear and tear
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Business cycle
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a period of macroeconomic expansion followed by a period of contraction
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Expansion
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a period of economic growth as measured by a rise in real GDP
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Economic growth
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a steady, long-term increase in real GDP
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Peak
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the height of economy expansion, when real GDP stops rising
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Contraction
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a period of economic decline marked by falling real GDP
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Trough
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the lowest point in an economic contraction, when real GDP stops falling
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Recession
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a prolonged economic contraction
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Depression
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a recession that is especially long and severe
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Stagflation
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a decline in real GDP combined with a rise in the price level
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Real GDP per capita
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real GDP divided by the total population
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Saving
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income not used for consumption
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Saving rate
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the proportion of disposable income that is saved
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Aggregate supply
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the total amount of goods and services in the economy available at all possible price levels
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Aggregate demand
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the amount of good and services in the economy that will be purchased at all possible price levels
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Non-market activities
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babysitting, mowing the lawn, cooking dinner, ect. -when people pay someone else to do these things for them -things people can do for themselves -does not effect GDP
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Underground economy
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a large amount of production and income is never recorded or reported to the government black market, illegal drugs, weapons, illegal gambling or even "under the table wages paid by companies to avoid paying businesses and income taxes
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Frictional unemployment
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unemployment that occurs when people take time of find a job
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Seasonal unemployment
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unemployment that occurs as a result of haves schedules or vacations, or when industries slow or shut down for a season
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Structural unemployment
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unemployment that occurs when workers' skills do not match the jobs that are available
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Cyclical unemployment
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unemployment that rises during economic downturns and falls when the economy improves
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Unemployment rate
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the % of nation's labor force that is unemployed
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Full employment
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the level of employment reached when there is no cyclical unemployment
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Underemployment
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working at a job for which one is overqualified, or working part-time when full time work is desired
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Inflation
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a general increase in prices
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Purchasing power
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the ability to purchase goods and services
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Consumer price index
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a price index determined by measuring the price of a standard group of goods meant to represent the "market basket" of a typical urban consumer
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The market basket
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a representative collection of goods and services
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Inflation rate
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the % rate of change in price level
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Hyperinflation
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inflation that is out of control
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Demand-pull theory
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theory that inflation occurs when demand for goods and services exceeds existing supplies
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Cost-pull theory
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theory that inflation occurs when producers raise prices in order to meet increased costs
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Deflation
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a sustained drop in the price level
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Poverty threshold
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the income level below which income is insufficient to support a family or household
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Poverty rate
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the % of people who live in households with income below the official poverty live
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Causes of Poverty
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Lack of education, location, racial and gender discrimination, economic skills, shifts in family structure
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Income distribution
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how the nation's total income is distributed among its people
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Anti-poverty policies
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enterprise zones, employment assistance-job training, welfare reform
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Revenue
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income received by government from taxes and non tax sources
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Proportional taxation
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a tax for which the percentage of income paid in taxes remains the same for all income levels
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Progressive taxation
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a tax for which the percentage of income paid in taxes increases as income increases
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Regressive taxation
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a tax for which the percentage of income paid in taxes decreases as income increases
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Sources of tax revenue
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individual income tax, corporate income tax, social insurance tax, excise tax, estate and gift tax, and tariffs
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Pay-as-you-earn taxation
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individuals usually pay most of their income tax throughout the year as they earn income
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Tax withholding
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taking tax payments out of an employee's pay before he or she receives it
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Tax return
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form used to file income taxes
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Taxable income
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income on which tax must be paid; total income- exemptions and deductions
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Mandatory spending
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spending on certain programs that is mandated or required by existing law
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Discretionary spending
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spending category about which government planners can make choices
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Entitlements
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social welfare program that people are "entitled to" if they meet certain eligibility requirements
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Medicare
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a national health insurance program that helps pay for health care for people over age 65 or with certain disabilities
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Social Security
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Old-age, survivors and disability insurance
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Medicaid
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entitlement program that benefits low-income families, sone people with disabilities, and elderly people in nursing homes
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Tax brackets
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a rate of incomes taxed at a given rate
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Disposable income
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after taxes are taken out, the money that is left over
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Transfer payments
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a payment made or income received in which no goods or services are being paid for, such as a benefit payment or subsidy
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Federal budget
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a plan for the federal governments revenues and spending for the coming year
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Office of Management and Budget (OMB)
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government office that manages the federal budget
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Congressional Budget Office (CBO)
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government agency that provides economic data to Congress
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Appropriations bill
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a bill that sets money aside for specific spending
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Fiscal policy
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the use of government spending and revenue collection to influence the economy
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Expansionary policies
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-increase government spending -lower taxes :raise income :raise consumption *fix unemployment creating jobs by giving businesses money by paying lower taxes so people will spend more money
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Contractionary policies
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-decrease government spending -increase taxes :lower income :lower consumption *fix inflation less money in circulation
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Classical economics
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the idea that free markets can regulate themselves
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Demand-side economics
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the idea that government spending and tax cuts help an economy by raising demand
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Keynesian economics
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-a form of demand-side economics that encourages action in increase or decrease demand and output -the economy is composed of three sectors- individuals, businesses, and government- and that government actions can make up for changes in the other two -proposes that by using fiscal policy the government can and should help the economy
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Supply-side economics
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a school of economics that believes tax cuts can help an economy by raising supply
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Balanced budget
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a budget in which revenues are equal to spending
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Budget surplus
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a situation in which the government takes in more than it spends
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Budget deficit
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a situation in which the government spends more than it takes in
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National debt
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all the money the federal government owes to bondholders
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Monetary policy
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the actions the Federal Reserve takes to influence the level of real GDP and the rate of inflation in the economy
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Federal Reserve
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the twelve banking districts created by the Federal Reserve Act
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Discount rate
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rate the Federal Reserve charges for loans to commercial banks
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Open market operations
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the buying and selling of government securities to alter the supply of money
