Chapters 5-9 Macroeconomics
A situation in which the market economy leads to too few or too many resources going to a specific economic activity
Parties who are not directly involved in a given activity or transaction
occurs if an activity creates benefits to uninvolved people
Occurs if an activity creates costs to uninvolved people
value adjusted for inflation or purchasing power vs. some base period
Value not adjusted for inflation nor the reduction in purchasing power
A sustained decrease in the average of all prices of goods and services in an economy
A sustained increase in the average of all prices of goods and services in an economy
Results from the the seasonal pattern of work in specific industries
Refers to unemployment resulting from business recessions
Structural changes in our economy cause some workers to become unemployed for very long periods of time because they cannot find jobs that use their particular skills
Refers to people who either change jobs or take new jobs
Adults who either have jobs or who are actively looking and available for jobs
Dynamic Tax Analysis
Recognizes that higher tax rates may shrink the tax base
Static Tax Analysis
Assumes that changes in the tax rate have no effect on the tax base
The negative difference between the purchase price and the sale price of an asset
The positive difference between the purchase price and the sale price of an asset
Proportional Tax System
A tax system in which the tax bill comprises exactly the same proportion
Regressive Tax System
A tax system in which as more dollars are earned, the percentage of tax paid on them falls
Progressive Tax System
As your income increases, the tax rate on each additional layer of income also increases
The percentage tax the Government is changing on this tax base
What you are going to tax
Cash payments made by governments to individual for which in return no services or goods are rendered
Transfers “In Kind”
Non-cash payments that are in the form of goods and services
Healthcare for the old
Consumer Price Index (CPI)
A price index measuring the changes in prices of goods and services typically purchased by consumers
Producer Price Index (PPI)
A price index measuring the changes in prices of goods and services that firms produce and sell
A price index measuring the changes in prices of all new goods and services produced in the economy
Nominal Rate of Interest
The market rate of interest as quoted today (not adjusted for inflation)
Real Rate of Interest
The nominal rate of interest minus the anticipated rate of inflation (adjusted for inflation)
Gross Domestic Product (GDP)
The total market value of all final goods and services produced during the year by resources located within a nation’s brders
Gross Private Domestic Investment (I)
Firm expenditures; Investments undertaken by businesses to add productive capacity
Consumption Expenditure (C)
Government Expenditures (G)
Goods and services purchased by the government
Refers to GDP calculated using the actual market prices at which goods and services are sold
Refers to an adjusted measurement of GDP which is based on the price levels that existed in some Base Period
Occurs when more of all goods and services can be produced within the economy
Real GDP per capita
It means to measure Real GDP on a per person bias when comparing nations
If savings is channeled into capital investment, _____________________________.
economic growth will occur
Free Trade encourages _________________________.
A more rapid spread of technology and industrial ideas
Open economies experience __________________________________________.
higher rates of economic growth
When most of the population is involved in agriculture
When much of the population becomes involved in the industrialized sector of the economy
Activities where people offer their knowledge and time to improve productivity, performance, potential, and sustanability
What is the size of our economy?
What is the size of our national debt?
How much does our government spend each year?
How much does the government receive from taxes?
What is the size of our annual deficit?
What is the level of unemployment?