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.

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)

Gross National Product – the sum of all goods and services produced in a nation in a year

# 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

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)

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)

goods brought into a country

Goods and Services sold to other countries

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

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

the state of the economy declines

economic trend
way people spend money

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

the act of regaining or returning to the original state of the economy