Chapter 14 Vocab
1. National income accounting-measurement of the national economy's performance,
dealing with the overall economy's income and output as well as the interaction of
consumers, businesses, and governments.
2. gross domestic product-total dollar value of all final goods and services produced n the
nation in a single year.
3. net exports-difference between what the nation sells to other countries (exports) and
what it buys from other countries (imports)
4. depreciation-loss of value because of wear and tear to consumer durables, such as cars:
also applies to producer goods-machines and equipment.
5. net domestic product-value of nation's total output (GDP) minus total value lost
through wear and tear on machines and equipment.
6. national income-total income earned by everyone in the economy.
7. personal income-total income individuals receive before personal taxes are paid.
8. transfer payments-welfare and other supplementary payments, such as unemployment
compensation, Social Security, and Medicaid, that a state or the federal government
makes to individuals, adding to an individual's income even though the payments are not
in exchange for any current productive activity.
9. disposable personal income-income remaining for people to spend or save after all
taxes have been paid.
10. Inflation-prolonged rise in the general price level of goods and services.
11. purchasing power-the real goods and services that money can buy; determines the
value of the money.
12. deflation-prolonged decline in the general price level.
13. consumer price index-government measure of the change in price over time of a
specific group go goods and services used by the average household.
14. base year-year used as a point of comparison for other years in a series of
statistics.
15. producer price index-measure of the change in price over time of a specific group of
goods used by businesses; formerly wholesale price index.
16. implicit GDP price deflator-price index that removes the effect of inflation from the
GDP so that the overall economy on one year can be compared to another year.
17. real GDP-figure resulting when the GDP is adjusted for inflation by applying the
price deflator.
18. aggregates-summation of all the individual parts in the economy.
19. aggregate demand-total quantity of goods and services in the entire economy that all
citizens will demand at any one time.
20. aggregate demand curve-a graphed line showing the relationship between the
aggregate quantity demands of all goods and services by all people and the average of all
prices measured by the implicit GDP deflator.
21. aggregate supply-real domestic output of producers based on the rise and fall of
prices.
22. aggregate supply curve-a graphed line showing the micro-economic measure of
aggregate demand based on real domestic output using the implicit GDP deflator as the
price index.
23. business fluctuations-ups and downs in an economy.
24. business cycle-irregular changes in the level of total output measured by real
GDP.
25. peak-period of prosperity in a business cycle in which economic activity is at its
highest point; also called a boom.
26. boom-period of prosperity in a business cycle in which economic activity is at its
highest point; also called a peak.
27. contraction-part of the business cycle during which economic activity is slowing
down; also called a trough.
28. recession-portion of the business cycle in which the nation's output, the real GDP,
does not grow for at least two quarters (six months.)
29. depression-major slowdown of economic activity during which millions are out of
work, many businesses fail, and the economy operates at far below capacity.
30. trough-lowest portion of the business cycle in which the downward spiral of the
economy levels off.
31. expansion-portion of the business cycle in which economic activity slowly increases;
also called a recovery.
32. recovery-portion of the business cycle in which economic activity increases; also
called an expansion.
33. innovations-inventions and new production techniques.
34. economic indicators-statistics of the economy to produce more goods, jobs and
wealth.
35. leading indicators-statistics that point to what will happen in the economy.
36. coincident indicators-economic indicators whose changes in activity seem to happen
at the same time as changes in overall business activity.
37. lagging indicators-indicators that seem to lag behind changes in overall business
activity.