Economics Chapter 6

Read GDP- the market value of final goods and services produced in an economy, stated in the prices of a given year.

is the real GDP divided by the total population

Is the upward or downward movement of economic activity, or real GDP, that occurs around the growth trend.

Macroeconomists that generally favor activist government policy.

macroeconomists who generally favor Laissez-faire or nonactivist policy.

is generally considered to be a decline in real output that persists for more than two consecutive quarters of a year.

a large recession

an upturn that lasts at least two consecutive quarters of a year.

is the percentage of people in the economy who are willing and able to work but who are not working.

unemployment resulting from fluctuations in economic activity.

unemployment caused by the institutional structure of an economy or by economic restructuring making some skills obsolete.

unemployment caused by people entering the job market and people quitting a job just long enough to look for and find another one.

the lowest sustainable rate of unemployment that policy makers believe is achievable given existing demographics and the economy's institutional structure.

those people in an economy who are willing and able to work.

measures the labor force as a percentage of the total population at least 16 years old

the number of people who are working as a percentage of people avaiable to work.

is the output that would materialize at the target rate of unemployment and the target rate of capacity utilization.

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.

a continual fall in the price level.

a continual rise in the price level.

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.

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.

CPI-measures the prices of a fixed basket of consumer goods, weighted according to each component's share of an average consumer's expenditures.

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.

PPI- is an index of prices that measures average change in the selling prices recieved by domestic producers of goods and services over time.

is the total amount of goods and services produced, adjusted for price-level changes.

the total amount of goods and services produced measured at current prices.

Inflation that people expect to occur

Inflation that surprises people.

when inflation hits triple digits-100 percent or more per year.