Problems such as unemployment would be corrected through the working of the invisible hand and that government attempts to improve the economy's performance would be ineffective.
Government intervention can help a depressed economy through monetary and fiscal policy.
Changes in the quantity of money.
Changes in taxes and government spending.
Output and employment fall in many industries
Periods or economic upturn when output and employment are rising.
Short run alternation between recession and expansion.
Business cycle peak
Point at which the economy turns from expansion to recession.
Business cycle trough
Point at which the economy turns from rescission to expansion.
Long run economic growth
The sustained upward trend in the economies output over time.
Rising overall level of prices
Falling overall level of prices.
When the overall level of prices does not change.
An economy that trades goods and services with other countries.
When the value of goods and services bought from foreigners is more then the value of goods and services it sells to them. Imports greater then exports.
Exports greater then imports
Keeps track of the flows of money between different sectors of the economy.
Household spending on goods and services
Share in the ownership of a company held by a share holder.
Borrowing in the form of an IOU that pays interest.
Payments by the government to individuals for which no good or services is provided in return
Total amount of household income available to spend on consumption and to save
Disposable income that is not spent on consumption.
The total amount of funds borrowed by federal, state and local governments in the financial markets.
Government purchases of goods and services
Total expenditures on goods and services by federal, state and local governments
Stocks of goods and raw materials held to facilitate business operations
Spending on productive physical capital ( Machinery and construction of buildings)
Final goods and services
Goods and services sold to the final user
Intermediate goods and services
Goods and services bought by one firm, by another firm that are inputs for production of final goods and services. Not used to calculate GDP
Total value of all final goods and services produced in the economy during a given year.
Some of consumers spending, investment spending, government purchases of goods and services and exports minus imports in the goal spending on domestically produced final goods and services in the economy.
Value of its sales minus the value of its purchases of intermediate goods and services
Difference between the value of exports and the value of imports
Total value of all final goods and services produced in the economy during a given year, calculated using prices of a selected base year.
Aggregated price level
Measure of the overall level of prices in the economy.
Hypothetical set of consumer purchases of goods and services.
Percentage of major types of spending such as housing transportation and groceries.
Consumer price index
Measures the cost of the market basket of a typical urban american family
Producer price index
Measures changes in the prices of goods purchased by producers.
All of the employed and unemployed people
Labor force participation rate
Percentage of the population age 16 or older that is in the labor force
People who are able to work but have given up on looking for a job
Marginally attached workers
Would like to be employed and have looked for a job in the recent past but are not currently looking for work.
Number of people who work part time because they can't find full time jobs
Period in which the real GDP growth rate is positive by the unemployment rate is still rising
Unemployment due to the time workers spend in job search
More people are seeking jobs in a particular market then there are jobs available at the current wage rate even when the economy is at the peak of the business cycle.
Wages that employers set above the equilibrium wage rate as an incentive for better employee performance.
Wage rate divided by the price level
Income divided by the price level
Shoe leather costs
Increased costs of transactions caused by inflation