important vocab econ test 3

  1. Real gross domestic product –
    (Real GDP) the market value of final goods and services produced in an economy, stated in the prices of a given year.
  2. Per capita real output
    • real GDP divided by the total
    • population.
  3. Keynesians –
    group of macroeconomists who generally favor activist government policy.
  4. Classicals –
    • group of macroeconomists who
    • generally favor laizzes-faire or nonactivist policies.
  5. Recession –
    • decline in real output that
    • persists for more than two consecutive quarters of a year.
  6. Depression –
    large recession
  7. Expansion –
    • an upturn that lasts at least 2
    • consecutive quarters in a year.
  8. Unemployment rate –
    • the percentage of people in the
    • economy who are willing and able to work but who are not working.
  9. Cyclical unemployment –
    • unemployment
    • resulting from fluctuations in economic activity
  10. Structural unemployment –
    • unemployment caused by the
    • institutional structure of an economy or by economic restructuring making some
    • skills obsolete.
  11. Frictional unemployment –
    unemployment caused by people entering the job market and people quitting a job just long enough to look for and find another one.

    The target rate of unemployment – lowest sustainable rate of unemployment that policy makers believe is achievable given existing demographics and the economy’s institutional structure.
  12. Labor force –
    people in an economy who are willing and able to work.
  13. Labor force participation rate –
    measures the labor force as a percentage of the total population at least 16 years old.
  14. Employment-population ratio –
    the number of people who are working as a percentage of people available to work.
  15. Potential output
    output that would materialize at the target rate of unemployment and the target rate of capacity utilization.
  16. Okun’s rule of thumb - +1% unemployment rate =
    -2% change in output.
  17. Inflation/deflation –
    a continual rise/fall in the price level.
  18. Price index –
    • a number that summarizes what happens to a weighted composite of prices of a selection of goods (often called
    • a market basket of goods) over time.
  19. GDP deflator –
    • index of the price level of aggregate output, or the average price of the components in total output (GDP)
    • relative to a base year.
  20. Consumer price index (CPI) –
    measures the prices of a fixed basket of consumer goods, weighted according to each component’s share of an average consumer’s expenditures.
  21. Personal consumption expenditure (PCE)
    deflator –
    measure of prices of goods that consumers buy that allows yearly changes in the basket of goods that reflect actual consumer purchasing habits.
  22. Producer price index (PPI) –
    • index of prices that measures average change in the selling prices received by domestic producers of goods
    • and services over time.
  23. Real output –
    total amount of goods and services produced, adjusted for price level changes.
  24. Nominal output –
    total amount of goods and services produced measured at current prices.
  25. Expected inflation –
    inflation we expect to occur.
  26. Unexpected inflation –
    inflation that surprises people.
  27. Hyperinflation –
    when inflation hits triple digits – 100% or more per year.
Card Set
important vocab econ test 3
vocab for 22