Macroeconomic vocabulary.docx

Macroeconomic vocabulary.docx

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Macroeconomicvocabulary

Macroeconomic

Note：

*=notimportantforexambutyoushouldknow

Chapter1.MeasurementofEconomicPerformance

GrossDomesticProduct（GDP）-themarketvalueofallfinalgoodsandservicesproduceddomesticallyduringtheyear.GDPincludesdomesticproductionbyforeignersandexcludesforeignproductionbycitizens.GDP=C+I+G+（X-M）expressesthatGDPisthesumofthespendingofconsumers,businesses,governmentandforeignersondomesticcurrentoutput;usedtocalculateGDPusingtheexpenditureapproach.

*Finalgoodsandservices-goodsandserviceswhicharepurchasedbytheirultimateconsumers.

Intermediategoods-goodspurchasedforresaleorusedtoproduceothergoods.

Expenditureapproach-determiningGDPbysummingtheexpendituresonfinalgoodsandservices.

transferpayments-giftsorpaymentsthatarenotforproductionofgoodsandservices;transferpaymentsdonotcountinGDP.

GrossNationalProduct（GNP）-themarketvalueofallfinalgoodsandservicesproducedbycitizensofacountryduringtheyear.GNPexcludesdomesticproductionofforeignersandincludesforeignproductionbycitizens.

nominalvalues-valuesexpressedincurrentdollaramounts.Alsocalledmoneyvalues.

realvalues-valuesthathavebeenadjustedtoremovetheeffectsofinflation,orexpressedintheprices（money）ofanotheryear.

baseyear-theyearusedasthesourceofpriceinformationwhenrealvaluesarecomputed.

inflationrate-therateofchangeinpricesovertime,onanannualbasis.

priceindex-anumberwhichiscalculatedfromtheeconomy’spriceandoutputdata,andwhichwillallowestimationoftheinflationrateovertime.Generally,apriceindexisconstructedbydeterminingthesumsofmoneythatwouldbenecessarytopurchasethesamecombinationofgoodsattwodifferenttimeperiods（andattwosetsofprices）,takingaratioofthesesums,andmultiplyingby100.Thepercentagechangeinapriceindexovertimecanbeusedasameasureofinflation.Bytheway,thepluralofindexis"indices."

ConsumerPriceIndex（CPI）-apriceindexwhichiscalculatedusingacombinationofitemswhichconsumersarelikelytobuy.Thisindexisoneofthosemostcommonlyusedbygovernmentandbusinesstodetermineinflationattheretaillevel.

GDPdeflator-apriceindexwhichiscalculatedusingthegoodscomprisingGDP.

Nominal（current）GDP-GDPcomputedusingcurrentyear’sprices.

Real（constant）GDP-GDPthathasbeenadjustedforinflationbyuseofapriceindexorpriceratio（ratioofpriceindices）.RealGDPisessentiallyGDPforoneyear,asitwouldbeevaluatedinsomeotheryear'sprices（theotheryearisreferredtoasthe"baseyear"）.RealGDPisalsosometimescalledrealoutput.

*realvaluecalculation-anynominalormoneyvaluecanbeconvertedintotheequivalentamountofmoneyofsomeotheryear.Theconvertedamountiscalledtherealvalue.Toconvertanamountfromoneyear（the"nominalyear"）toanotheryear（the"realyear"）theformulais

*priceratio-theratioofpriceindices,thiscanalsobearatioofnominaltorealGDP.

moneyillusion-awrongappreciationoftheincreasingincomewithoutrecognizingtheincreasingpricelevel

menucost-thecostaccruedwhentheinflationbumpuptheover-allprice.

*inventoryinvestment-changesingoodsproducedbutnotsoldandinresourcespurchasedbutnotused.ThesearecountedinGDPfortheyeartheyareproduced.

governmentspending（G）-purchasesbythegovernmentofgoodsandservices（consumptionandinvestment）;thesecondlargestcomponentofGDP.

netexports（X-M）-goodsproduceddomesticallybutpurchasedbyforeignersminusgoodspurchasedfromforeigners.

GDPpercapita-GDPofacountrydividedbythecountry'spopulation

DisposablePersonalIncome（DPI）:

theincomeofhouseholdsaftertaxeshavebeenpaid

NationalIncome（NI）-theincomeearnedbyhouseholdsandprofitsearnedbyfirmsaftersubtractingdepreciationandindirectbusinesstaxes

NationalEconomicAccounts（NEA）-acomprehensivegroupofstatisticsthatmeasuresvariousaspectsoftheeconomy’sperformance

undergroundeconomy-alltheillegalproductionofgoodsandservicesandlegalproductionthatdoesnotpassthroughmarkets

personalincome-incomereceivedbyhouseholds

Chapter2AggregatedemandandAggregatedsupply

aggregatedemand-thedemandforallthegoodsandservicesbyallhouseholds,businesses,governmentsandforeigners.

aggregatesupply-thesupplyofallgoodsandservicesbyallproducersintheeconomy

aggregatedemandcurve（AD）-thedownward-slopinggraphicalrepresentationoftheinverserelationshipbetweenthepricelevelandthequantityofgoodsandservicesdesiredbybuyers（consumers,businesses,government,andforeigners）fromtheeconomy.Therelationshipisinversebecausethepurchasingpowerofmoneyrisesaspriceleveldecreases,lowerpricelevelstendtolowerrealinterestrates（makingiteasiertoborrow）,andlowerpricelevelsreducebuyers'tendencytosubstituteforeigngoodsfordomesticpurchases.

aggregatesupplycurve-thegraphicalrepresentationoftherelationshipbetweenthepricelevelandthequantityofgoodsandservicesproducedintheeconomy.Intheshortrun,theaggregatesupplyisthoughttobeapositiverelationship（shownasanupwardslopingcurve）.Inthelongrun,aggregatesupplyisrepresentedbyaverticallineindicatingthatoutputdoesnotdependonthepricelevel.

shortrunaggregatesupply（SRAS）-intheshortrun,theoutputoftheeconomyisdirectlyrelatedtothepricelevelbecause,aspricesrise,resourcecosts（basedonlong-termcontracts）willnotincreaseasfast,soprofits（andincentivestoexpandproduction）willincrease.

longrunaggregatesupply（LRAS）-inthelongrun,theoutputoftheeconomyisnotrelatedtothepricelevelbecause,aspricesrise,resourcecostswilleventuallyincrease,removingincentivestoexpandproductionasaresponsetothepricelevel.Outputisbasedontechnologyandtheresourcesavailableatfullemployment

businesscycle-awageofeconomicactivitycomprisedofanexpansionandarecession

break-evenpoint-pointwheretheconsumptionfunctioncrossesthe45degreerayandincomeequalsspendingsothatsavingiszero

classicaleconomictheory-thepredominateparadigmineconomicanalysisfromabout1800until1930,basedonSay’seconomy

consumptionfunction-therelationshipbetweenconsumerspendingandincome

equilibriumpricelevel-thepricelevelthatequatesaggregatesupplyandaggregatedemand,theaveragelevelofpricesintheeconomy

equilibriumquantity-theamountofoutputthatresultsinnoshortageorsurplus,theamountofgoodsandserviceboughtandsoldintheeconomy

expansion-asustainedimprovementineconomicactivity

KeynesiaTheory-theorythatopposesClassicaltheorybyemphasizingtheshortrunandfocusingoneconomiesthatareoperatingbelowfullcapacity

marginalpropensitytoconsumer（MPC）-ideathatgivenanextradollar,howmuchwillitspent

marginalpropensitytosave（MPS）-thefractionofeachadditionaldollarofincome

multiplier-aninitialchangeinspendingintheeconomythatwillhaveamagnified,ormultiple,effectonincome

recession-asustaineddeclineineconomicactivity.

stagflation-thecombinationofrisingpricesandfallingoutput

recessionarygap-theamountbywhichequilibriumrealGDPwouldhavetoincreasetoreachpotentialGDP（theintersectionofLASandAD）.

inflationgap-theamountbywhichequilibriumrealGDPwouldhavetoincreasetoreachpotentialGDP（theintersectionofLASandAD）.

Chapter3Fiscalpolicy

fiscalpolicy-usinggovernmenttaxingandspendingtoaffectGDP,inflationandunemployment.

expansionaryfiscalpolicy-involvesincreasinggovernmentpurchases,increasingtransfers,ordecreasingtaxesinordertoshiftaggregatedemandtotherightandboostrealGDP

contractionaryfiscalpolicy-involvesdecreasingpurchases,decreasingtransfers,orincreasingtaxes,thusshippingaggregatedemandtotheleft,whichwilllowerthepricelevelanddecreaserealGDP.

balanced（government）budget-asituationinwhichthegovernmentistakinginexactlythesameamountoftaxrevenueasitisspending

（government）budgetdeficit-asituationinwhichthegovernmentraiseslessintaxrevenuesthanitspends.

（government）budgetsurplus-asituationinwhichthegovernmentraisesmoreintaxrevenuesthanitspends.

*nationaldebtorgovernmentdebt-thesumofthegovernmentbudgetsurplusesanddeficits;thetotalowedbythegovernment

automaticstabilizers-programsthatwillincreasegovernmentspending（orreducetaxes）duringrecessionsandreducegovernmentspending（orincreasetaxes）duringgrowthperiodsintheeconomy,withoutspecialactionbygovernmentofficials.Theyareautomaticallycountercyclical.Theseprogramsincludeunemploymentinsurance,corporatetaxesandtheprogressiveincometax.

crowdingouteffect-whenreductionsinprivateconsumerandbusinessspendingoccurbecausegovernmentdeficitsraiserealinterestrates.

rationalexpectations-theideathathouseholdsandbusinesseswillusealltheinformationavailabletothemwhenmakingeconomicdecision

Chapter4FinancialSector

FederalFundsmarket-amarketwherebanksinneedofreservescanborrowthemfromotherbanks（whohaveanexcess）.

FederalFundsRate-theinterestratebankschargeoneanotherforborrowedreserves.Itreflectsthediscountrate,butneednotbethesame.Asistrueofallinterestrates,itisdeterminedinamarket（theFederalFundsmarket,tobeexact）.

bond-apromisetopayacertainamountinthefuture.Thepromisemightalsoinvolvepayinginterestbetweenthecurrenttimeandthefuturebigpayoff.Bysellingabond,agover