Chapter 3. The Macroeconomic Perspective
KEY TERMS
- business cycle
- the economy’s relatively short-term movement in and out of recession
- depreciation
- the process by which capital ages over time and therefore loses its value
- depression
- an especially lengthy and deep decline in output
- double counting
- a potential mistake to avoid in measuring GDP, in which output is counted more than once as it travels through the stages of production
- durable good
- long-lasting good like a car or a refrigerator
- exchange rate
- the price of one currency in terms of another currency
- final good and service
- output used directly for consumption, investment, government, and trade purposes; contrast with “intermediate good”
- GDP per capita
- GDP divided by the population
- gross domestic product (GDP)
- the value of the output of all final goods and services produced within a country in a year
- gross national product (GNP)
- includes what is produced domestically and what is produced by domestic labor and business abroad in a year
- intermediate good
- output provided to other businesses at an intermediate stage of production, not for final users; contrast with “final good and service”
- inventory
- good that has been produced, but not yet been sold
- national income
- includes all income earned: wages, profits, rent, and profit income
- net national product (NNP)
- GNP minus depreciation
- nominal value
- the economic statistic actually announced at that time, not adjusted for inflation; contrast with real value
- nondurable good
- short-lived good like food and clothing
- peak
- during the business cycle, the highest point of output before a recession begins
- real value
- an economic statistic after it has been adjusted for inflation; contrast with nominal value
- recession
- a significant decline in national output
- service
- product which is intangible (in contrast to goods) such as entertainment, healthcare, or education
- standard of living
- all elements that affect people’s happiness, whether people buy or sell these elements in the market or not
- structure
- building used as residence, factory, office building, retail store, or for other purposes
- trade balance
- gap between exports and imports
- trade deficit
- exists when a nation’s imports exceed its exports and it calculates them as imports –exports
- trade surplus
- exists when a nation’s exports exceed its imports and it calculates them as exports – imports
- trough
- during the business cycle, the lowest point of output in a recession, before a recovery begins
