Deals with the economy as a whole. Macroeconomics focuses on the determinants of total national income, deals with aggregates such as aggregate consumption and investment, and looks at the overall level of prices instead of individual prices.
The behavior of all households and firms prices.
Prices that do not always adjust rapidly to maintain equality between quantity supplied and quantity demanded.
The cycle of short-term ups and downs in the economy
The total quantity of goods and services produced in an economy in given period.
A period during which aggregate output declines. Conventionally, a period in which aggregate output declines for two consecutive quarters.
A prolonged and deep recession.
expansion or boom
The period in the business cycle from a trough up to a peak during which output and employment grow.
contraction, recession, or slump
The period in the business cycle from a peak down to a trough during which output and employment fall.
The percentage of the labor force that is unemployed.
An increase in the overall price level.
A period of very rapid increases in the overall price level.
A decrease in the overall price level.
Cash payments made by the government to people who do not supply goods, services, or labor in exchange for these payments.
Treasury bonds, notes, and bills
Promissory notes issued by the federal government when it borrows money. (gov’t)
Promissory notes issued by firms when they borrow money. (firm)
shares of stock
Financial instruments that give to the holder a share in the firm’s ownership and therefore the right to share in the firm’s profits.
The portion of a firm’s profits that the firm pays out each period to its shareholders.
Government policies concerning taxes and spending
-expansionary = taxes cut/gov’t spending increases
-contractionary = taxes grow/gov’t spending decreases
The tools used by the Federal Reserve to control the short-term interest rate.
The phrase used by Walter Heller to refer to the government’s role in regulating inflation and unemployment.
A situation of both high inflation and high unemployment.
national income and product accounts
Data collected and published by the government describing the various components of national income and output in the economy.
gross domestic product (GDP)
The total market value of all final goods and services produced within a given period by factors of production located within a country.
Goods that are produced by one firm for use in further processing by another firm.
The difference between the value of goods as they leave a stage of production and the cost of the good as they entered that stage.
gross national product (GNP)
The total market value of all final goods and services produced within a given period by factors of production owned by a country’s citizens, regardless of where the output is produced.
A method of computing GDP that measures the income–wage, rants, interest, and profits–received by all factors of production in producing final goods and services.
personal consumption expenditures (C)
Expenditures by consumers on goods and services.
gross private domestic investment (I)
Total investment in capital–that is, the purchase of new housing, plants, equipment, and inventory by the private (or nongovernment) sector.
-nonresidential = expenditures by firms for machines, tools, plants, and so on
-residential = Expenditures by households and firms on new houses and apartment buildings.
change in business inventories
The amount by which firms’ inventories change during a period. Inventories are the goods that firms produce now but intend to sell later.
The total value of all newly produced capital goods produced in a given period.
Gross investment minus deprecation
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