Economics unit 4 study guide

Economic indicators
Measure of the performance of the economy, and its position in the business
Leading indicators
key economic variables that economists use to predict a new phase of a business cycle.
GDP
Gross Domestic product-measure of all final goods and services produced annually in an economy (How productive a country is by itself, without the help from different countries)
GNP
Gross National Product – the sum of all goods and services produced in a nation in a year
Productivity
# of goods and services produced from each unit of labor input
Unemployment Rate
% of people 16+ that are unemployed at any given date or looking for work
seasonal unemployment
when people loose their jobs because their industry slows or shuts down for a season. When the season changes, their isn’t a demand for that type of labor (Countryside in the winter.)
structural unemployment
Unemployment of workers whose skills are not demanded by employers, who lack sufficient skill to obtain employment, or who cannot easily move to locations where jobs are available
Cyclical unemployment
unemployment that rises during economic downturns and falls when the economy improves (real-estate)
Frictional unemployment
type of unemployment that occurs when people take time to find a job that fits their job skills and taste
inflation
a rise in prices and a decrease in the value of money
cost-push inflation
When prices rise due to an increase in the cost of production.
demand-pull inflation
occurs when total spending in the economy is excessive
aggregate demand
the amount of goods and services in the economy that will be purchased at all possible price levels
Consumer confidence
Consumer spending, which is one of the indicators that economists use to assess the state of the economy. (if consumers are spending more money, then they think that the economy is good)
CPI
Consumer Price Index (changes in average price of consumption – or cost of living) (when the price changes)
Housing starts
one of the leading economic indicators that measures the number of permits issued to construction companies to build new houses (if they give more permits to build new houses, the economy is good, because they know that people are in high demand of houses)
Imports
goods brought into a country
exports
Goods and Services sold to other countries
Income
the financial gain (earned or unearned) accruing over a given period of time
Cost of living
The average cost of life’s basic necessities, such as shelter, food, and clothing.
distribution of income
the way in which income is sorted among families, individuals, or other designated groups in the economy
loose monetary policy
monetary policy that makes credit inexpensive and abundant possibly leading to inflation.
business cycle
Recurrent swings from economic hard times to recovery and growth, and repeating itself
Monetary policy
controlling the supply of money available
FED
the central bank of the United States (12 around US)
3 goals of the FED
1.High employment
2. stable prices
3. steady growth
2 varibale included in inflation?
supply and demand
One way that the FED fights inflation?
Buy and sell government securities
FOMC (The Federal Open Market Committee)
most powerful committee of the FED, because it makes the decisions that affect the economy as a whole by manipulating the money supply.
goal of FED’s banking supervision
promote the safety of banks
Purpose of the FED
to keep the economy coming
tight monetary policy
Monetary policy that makes credit expensive in an effort to slow the economy.
stock market
an exchange where security trading is conducted by professional stockbrokers
Business cycle
a period of macroeconomic expansion followed by a period of contraction
recession
the state of the economy declines
economic trend
way people spend money
expansion
a period of economic growth as measured by a rise in real GDP
recovery
the act of regaining or returning to the original state of the economy