Macroeconomics Final Key Terms Study Guide

 GDP – ( total output) total value of all final goods and services produced for the marketplace during a given period, within the nation’s borders.  Intermediate goods – goods used up in the process of producing something else (don’t count in GDP)  Final goods – a product sold to its final user  Flow variable – measures the rate of production (GDP is one)  Nominal variable – measured without in dollars without adjustment for the dollar’s changing value  Real variable – adjusted for the dollar’s changing value  Annual growth rate – for GDP is focused on and reported quarterly – so it is annualized.  Transfer Payments – a government payment to a person that is not a good or service, not associated with the production of goods or services. Is not included in GDP (social security,  Factor payments – payments to the owners of resources that are used in production (interest payments, rent, wages, salaries, and entrepreneurship)  Financial transactions – trading of stocks or bonds (not in GDP)  Expenditure approach – to measure GDP = C + I + G + NX  Capital stock – when you add up all the values of capital goods u get it.  Net investment – total investment – depreciation  Depreciation – the capital that is used up during the year (not in GDP)  Government outlays – some gov ernment purchases and transfer payments and interest on national debt… that are not included in GDP.  Value added – a firm’s contribution  the revenue a firm receives for its output (minus) the cost of the intermediate goods it buys  Value added approach – GDP = sum the values added by all firms in the economy.  Factor payment approach – GDP = sum of the factor payments earned by all households in the economy / or total income earned in the economy / or total expenditure  Full employment – when cyclical une mployment is reached to zero  Potential output – the output we could have produced if the economy were operating at full employment.  Slump – a period during which real GDP is below potential and/or the employment rate is below normal  Price level – average of the prices of all goods and services in the economy  Index numbers – how price levels are calculated at reported  Price index – a measure of the price level  Index – a series of numbers used to track a variable’s rise or fall over time…….. (Value of measure in current time period / value of measure in the base period) x 100  GDP deflator – a price index used to track rise and fall in the price level over time .  CPI – an index of the cost, over time, of a market basket of goods purchased by a typical household.  Cost of market basket in current year/cost of market basket in base year