Economics Chapter 6

  1. Real Gross Domestic Product
    Read 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
    is the real GDP divided by the total population
  3. Business Cycle
    Is the upward or downward movement of economic activity, or real GDP, that occurs around the growth trend.
  4. Keynesians
    Macroeconomists that generally favor activist government policy.
  5. Classicals
    macroeconomists who generally favor Laissez-faire or nonactivist policy.
  6. Recession
    is generally considered to be a decline in real output that persists for more than two consecutive quarters of a year.
  7. Depression
    a large recession
  8. Expansion
    an upturn that lasts at least two consecutive quarters of a year.
  9. Unemployment Rate
    is the percentage of people in the economy who are willing and able to work but who are not working.
  10. Cyclical Unemployment
    unemployment resulting from fluctuations in economic activity.
  11. Structural Unemployment
    unemployment caused by the institutional structure of an economy or by economic restructuring making some skills obsolete.
  12. 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.
  13. Target Rate of Unemployment
    the lowest sustainable rate of unemployment that policy makers believe is achievable given existing demographics and the economy's institutional structure.
  14. Labor Force
    those people in an economy who are willing and able to work.
  15. Labor Force Participation Rate
    measures the labor force as a percentage of the total population at least 16 years old
  16. Employment-Population Ratio
    the number of people who are working as a percentage of people avaiable to work.
  17. Potential Output
    is the output that would materialize at the target rate of unemployment and the target rate of capacity utilization.
  18. Okun's Rule of Thumb
    states that a 1 percentage point change in the unemployment rate will be associated with a 2 percent change in output in the opposite direction.
  19. Deflation
    a continual fall in the price level.
  20. Inflation
    a continual rise in the price level.
  21. Price Index
    a number that summarizes what happens to a weighted compostie of prices of a selection of goods over time. Often called the market basket of goods.
  22. GDP Deflator
    gross domestic product deflator is an index of the price level of aggregate output, or the average of price of the components in total output (GDP) relative to a base year.
  23. 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.
  24. Personal Consumption Expenditure Deflator
    PCE deflator- is a measure of prices of goods that consumers buy that allows yearly changes in the basket of goods that reflect actual consumer purchasing habits.
  25. Producer Price Index
    PPI- is an index of prices that measures average change in the selling prices recieved by domestic producers of goods and services over time.
  26. Real Output
    is the total amount of goods and services produced, adjusted for price-level changes.
  27. Nominal Output
    the total amount of goods and services produced measured at current prices.
  28. Expected Inflation
    Inflation that people expect to occur
  29. Unexpected Inflation
    Inflation that surprises people.
  30. Hyperinflation
    when inflation hits triple digits-100 percent or more per year.
Card Set
Economics Chapter 6
All economics key terms and questions for Chapter 6