microeconomics
study of production and consumption decisions of individual producers and consumers; allocation of scarce resources among industries as well established
macroeconomics
study of the behavior of the economy as a whole; established during the Great Depression; includes the study of economic recessions and how to avoid them; long run economic growth; inflation; open economy macro
open economy
including trade/ immigration
paradox of thrift
individually responsible behavior during hard times is bad for the overall economy; profilgate behavior leads to good times for all
cash circulation
an individual with more cash on hand is richer. But if everyone has more cash on hand, that simply raises the price level, leaving the overall purchasing power the same as before
Gross Domestic Product (GDP)
the market value of final goods and services produced in a country in a given period of time; a weighed average (market value of the final goods and services is used to add up the quantities of different goods and services into one measurement)
labor force participation rate (LFPR)
the ratio of the actual labor force to the potential labor force (a/p)
potential labor force
persons 16 years of age and older who are non-institutionalized
actual labor force
includes those employed and unemployed
unemployed
people who are actively looking for a job
capital good
a long-lived good used in the production of other goods and services
value added
the market value of a firm's product or service minus the cost of inputs purchased form other firms
domestic
production that takes place within a country's border (regardless of the nationality of owner)
Gross National Product (GNP)
the total factor income that is earned by the citizens of a country (+ income earned abroad by Americans, -incomes earned by foreigners)
buyers of final goods/services
households, firms, government, foreign buyers
total expenditure
total market value of goods and services; GDP
categories of consumption expenditure
consumer durables, consumer non-durables, services
investment expenditure
spending by firms on final goods and services, primarily capital goods and housing
categories of investment expenditures
business fixed investment, residential investment, inventory investment
business fixed investment
purchase of new capital goods
residential investment
construction of new housing
inventory investment
goods that a firm produces but doesn't sell during the accounting period
government expenditure
purchases by federal, state, and local governments of final goods and services
transfer payments
payments by the government for which no current goods or services are received in exchange
exports
domestically produced goods that are sold abroad
imports
foreign made goods that are purchased by domestic buyers
labor income
wages, salaries, benefits, and incomes of the self-employed
nominal GDP
GDP valued at current prices; measures the current dollar value of production
real GDP
GDP valued at some base year prices rather than current prices; measures the actual physical volume of production
non-market economic activities
unpaid household activities, volunteer services, underground economy; not included in real GDP