Macroeconomics: Principles and Policy – Chapter 5: The Goals of Macroeconomic Policy

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labor, machinery, buildings and other resources used to produce outputs
goods and services that the economy produces
growth policy
government policy intended to make the economy grow faster in the long run
labor productivity
amount of output a worker turns out in an hour (or week or year) of labor; if output is measured by GDP, it is GDP per hour of work
potential GDP
real GDP that the economy would produce if its labor and other resources were fully employed
labor force
number of people holding or seeking jobs
production function
volume of outputs that can be produced from given inputs given the available technology
real GDP per capita
ratio of real GDP to the populatioin
unemployment rate
number of unemployed people, expressed as a percentage of the labor force
frictional unemployment
unemployment that is due to normal turnover in the labor market; includes people who are temporarily between jobs because they are moving or changing occupations, or are unemployed for similar reasons
structural unemployment
refers to workers who have lost their jobs because they have been displaced by automation, because their skills are no longer in demand or because of similar reasons
cyclical unemployment
unemployment attributable to a decline in the economy’s total production; rises during recession and falls as prosperity is restored
full employment
situation in which everyone who is willing and able to work can find a job
unemployment insurance
government program that replaces some of the wages lost by eligible workers who lose their jobs
purchasing power
volume of goods and services that a given sum of money will buy
real wage rate
wage rate adjusted for inflation
relative price
item’s price in terms of some other item rather than in terms of dollars
real rate of interest
percentage increase in purchasing power that the borrower pays to the lender for the privilege of lending
nominal rate of interest
percentage by which the money the borrower pays back exceeds the money that he borrowed, making no adjustment for any decline in the purchasing power of this money
economic growth
notion that standards of living rise from one year to the next
redistribution by inflation
in general, those who lend money are apt to be victimized by inflation, and borrowers often gain from inflation
expected rate of inflation
often inaccurate prediction put forth by economists and added to the real rate of interest to get the nominal rate of interest
capital gain
difference between the price at which an asset is sold and the price at which it was bought
discouraged worker
unemployed person who gives up looking for work and is therefore no longer counted as part of the labor force
Categories: Macroeconomics