Chapter 13

hansmeyer's version from 2015-04-30 11:30

Section 1

Question Answer
national income accountingmeasurement of the national economy's performance, dealing with the overall economy's output and income
gross domestic product (GDP)total dollar value of all final goods and services produced in a nation in a single year
expenditures made in four economic categoriesconsumer sector, investment sector, government sector, net exports
consumer sectorgoods and services bought directly by consumers
investment sectorbusiness purchases of items used to produce other goods
government sectorgoods and services bought make up the third category
net exportsdifference between what the nation sells to other countries and what it buys from other countries
depreciationloss of value because of wear and tear to durable goods and capital goods
net domestic product (NDP)value of the nation's total output (GDP) minus the total value lost through depreciation on equipment
national income (NI)total income earned by everyone in the economy
personal income (PI)total income that individuals receive before personal taxes are paid
calculation for PIadd transfer payments and subtract corporate taxes, profits that businesses reinvest in business to expand, and Social Security contributions employers make from personal income
calculation for NIsum of wages and salaries, income of self-employed individuals, rental income, corporate profits, and interest on savings and other investments
transfer payments welfare payments and other supplementary payments that a state or the federal government makes to individuals
disposable personal income (DPI)income remaining for people to spend or save after all taxes have been paid
calculation for DPIsubtract personal taxes from PI

Section 2

Question Answer
inflationprolonged rise in the general price level of final goods and services
purchasing powerthe real goods and services that money can buy; determines the value of money
deflationprolonged decline in the general price level of goods and services (rarely happens)
consumer price index (CPI)a statistical measure of the average prices of a specified set of goods and services purchased by typical consumers in city areas
market basketrepresentative group of goods and services used to compile the CPI
base yearyear used as a point of comparison for other years in a series of statistics
producer price index (PPI)measure of the change in price over time that U.S. producers charge for their goods and services
GDP price deflatorprice index that removes the effect of inflation from GDP so that the overall economy in one year can be compared to another year
real GDPGDP that has been adjusted for inflation by applying the price deflator

Section 3

Question Answer
business fluctuationsups and downs in an economy
business cyclethe irregular changes in the level of total output measured by the real GDP
peak/boomperiod of prosperity in a business cycle in which economic activity is at its highest point
contractionpart of the business cycle during which economic activity is slowing down
recessionpart of the business cycle in which the nation's output (real GDP0 declines for at least six months
depressionmajor slowdown of economic activity
troughlowest part of the business cycle in which the downward spiral of the economy levels off
expansion/recoverypart of the business cycle in which economic activity slowly increases