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Unemployment rates – the number of unemployed workers as a fraction of the total labor force
Unemployment – the state of actively seeking paid work but being unable to find it
Inflation – a general increase in prices
Gross Domestic Product – GDP – the market value of final goods and services produced in an
economy during a specified period of time
Per capita – literally, per head, used to denote an average value for a population
Average labor productivity – total output divided by the quantity of labor employed in its
production
Expansion – a period between trough and peak in economic activity
Recession – a period between peak and trough in economic activity
Depression – a severe recession
Business cycle – fluctuations in aggregate economic activity
Final goods – goods or services that are purchased by their ultimate user
Intermediate goods – a good or service that is used in the process of producing other goods and
services
Capital goods – long-lived goods that are themselves produced and are used to produce other
goods and services, but are not used up in the production process
Labor force – the sum of those individuals who are employed and those who are seeking paid
work but have not found it
Investment – spending on capital equipment, inventories, and structures,including household
purchases of new housing
Government purchases – spending of goods and services by federal, state, and local governments
Net exports – the difference between the value of goods and services sold to foreigners and the
value of goods and services purchased from foreigners
Real GDP – the production of goods and services valued at constant prices
Consumer Price Index (CPI) – an index constructed by comparing the cost of purchasing a fixed
basket of goods at different times
Nominal GDP – the production of goods and services valued at current prices
Labor force participation rate – the fraction of the working-age population who are in the labor
force
Frictional unemployment – unemployment the results because it takes time for workers to search
for the jobs that are best suited to their tastes and skills
Structural unemployment – unemployment that results from the mismatch of skills, locations, or
other important characteristics between job seekers and abailable jobs
Cyclical unemployment – unemployment caused by deviations of output from its potential level
Financial markets – the institutions through which individuals with savings can supply these
funds to persons or firms that wish to borrow money to purchase consumption goods or invest in
physical capital
Human capital – skills and experience that are acquired through education, training, and on the
job experience that increase a worker’s productivity
Wealth – the total value of assets used as a store of value
Intermediary – a third party who acts as a link between two others who wish to transact business
Net capital outflow – the difference between the purchases of foreign assets by domestic residents
and the purchases of domestic assets by foreign residents
Foreign direct investment (FDI) – when a company invests in an operational entity in a foreign
country that the company or individual will manage directly
Portfolio investment – the purchase of shares of stock or bonds
Crowding out – the decrease in private investment that occurs as a result of reduction in
government saving or an increase in government borrowing
Liquidity – the ease with which a nonmonetary asset may be converted into money
Currency – coins and bills in the hands of the public
35. Money supply the quantity of money available to the economy
36. Monetary policy – the use of the supply of money in the economy by the Federal Reserve to
influence the level of aggregate demand
37. Open market operations – a tool used by the Federal Reserve to adjust the money supply by
buying or selling US government bonds in the financial market
38. Reserves – the fraction of deposit liabilities that banks hold to meet depositor withdrawels
39. Money multiplyer – the ratio of the money supply in the monetary base
40. Monetary base – the quantity of currency plus bank reserves
41. Reserve requirements – the amount of reserves that the Federal Reserve requires banks to hold
42. Discount rate – the interest rate that the Federal Reserve charges banks when they must borrow
reserves from it
43. Federal funds rate – the rate that banks charge other banks when they lend reserves
44. Bank run – a sudden rush of depositors seeking to withdraw funds from the banking system
45. Neutrality of money – the proportion that in the long run, changes in the quantity of money affect
the the price level but do not affect any real quantities
46. Velocity of money – the ratio of nominal GDP to the money supply; in effect, the average number
of transactions supported by each dollar of the money supply
47. Potential output – the quantity of output that would be produced by an economy if all of its
resources were being employed at normal rates
48. Output gap – the difference between actual output and potential output
49. Natural rate of unemployment – the level of unemployment that would exist if the economy were
producing at its potential output
50. Okun’s Law – the relationship identified by Arthur Okun between the output gap and the level of
cyclical unemployment