macro unit 3

Question 1

Gross Domestic Product (GDP)

Answer 1

the total value of all final goods and services produced in the economy during a given year

Question 2

value-added approach

Answer 2

survey firms and add up their contributions to the value of final goods and services

Question 3

factor markets

Answer 3

where resources, especially capital labor, are bought and sold

Question 4

expenditure approach

Answer 4

add up aggregate spending on domestically produced final goods and services in the economy

Question 5

aggregate spending

Answer 5

the total spending on domestically produced final goods and services in the economy - the sum of consumer spending, investment spending, government purchases of goods and services, and exports minus imports

Question 6

income approach

Answer 6

add up the total factor income earned by households from firms in the economy, including rent, wages, interest, and profit

Question 7

value-added

Answer 7

the value of its sales minus the value of its purchases of inputs

Question 8

net exports

Answer 8

the difference between the value of exports and the value of imports (X-IM)

Question 9

aggregate output

Answer 9

the total quantity of final goods and services produced within an economy

Question 10

real GDP

Answer 10

the total value of all final goods and services produced in the economy during a given year, calculated using the prices of a selected base year in order to remove the effects of price changes

Question 11

nominal GDP

Answer 11

the total value of all final goods and services produced in the economy during a given year, calculated with the prices current in the year in which the output is produced

Question 12

chain-linking

Answer 12

the method of calculating changes in real GDP using the average between the growth rate calculated using an early base year and the growth rate calculated using a later base year

Question 13

GDP per capita

Answer 13

GDP divided by the size of the population - average GDP per person

Question 14

employed

Answer 14

currently holding a job in the economy, either full time or part time

Question 15

unemployed

Answer 15

actively looking for work but aren’t currently employed

Question 16

labor force

Answer 16

equal to the sum of the employed and the unemployed

Question 17

labor force participation rate

Answer 17

percentage of the population aged 16 or older that is in the labor force

Question 18

unemployment rate

Answer 18

the percentage of the total number of people in the labor force who are unemployed

Question 19

discouraged workers

Answer 19

nonworking people who are capable of working but have given up looking for a job due to the state of the job market

Question 20

marginally attached workers

Answer 20

would like to be employed and have looked for a job in the recent past but are not currently looking for work

Question 21

underemployed

Answer 21

workers who would like to work more hours or who are overqualified for their jobs

Question 22

frictional unemployment

Answer 22

unemployment due to the time workers spend in job search

Question 23

structural unemployment

Answer 23

unemployment that results when workers lack the skills required for the available jobs, or there are more people seeking jobs in a labor market than there are jobs available at the current wage rate

Question 24

efficiency wages

Answer 24

wages that employers set above the equilibrium wage rate as an incentive for better employee performance

Question 25

natural rate of unemployment

Answer 25

the unemployment rate that arises from the effects of frictional plus structural unemployment

Question 26

cyclical unemployment

Answer 26

unemployment due to recession or economic downturn

Question 27

real wage

Answer 27

the wage rate divided by the price level to adjust for the effects of inflation or deflation

Question 28

real income

Answer 28

income divided by the price level to adjust for the effects of inflation or deflation

Question 29

inflation rate

Answer 29

the percentage increase in the overall level of prices per year

Question 30

shoe-leather costs

Answer 30

increased costs of transactions caused by inflation

Question 31

menu costs

Answer 31

real costs of changing listed prices

Question 32

unit-of account costs

Answer 32

arise from the way inflation makes money a less reliable unit of measurement

Question 33

nominal interest rate

Answer 33

the interest rate actually paid for a loan

Question 34

real interest rate

Answer 34

nominal interest rate minus the rate of inflation

Question 35

disinflation

Answer 35

the process of bringing the inflation rate down

Question 36

aggregate price level

Answer 36

a measure of the overall level of prices in the economy

Question 37

market basket

Answer 37

hypothetical set of consumer purchases of goods and services

Question 38

price index

Answer 38

measures the cost of purchasing a given market basket in a given year. The index value is normalized so that it is equal to 100 in the selected base year

Question 39

consumer price index (CPI)

Answer 39

measures the cost of the market basket of a typical urban American family

Question 40

producer price index (PPI)

Answer 40

measures the prices of goods and services purchased by producers

Question 41

GDP deflator

Answer 41

for a given year i 100 times the ration of nominal GDP to real GDP in that year