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Principles of Macroeconomics 3e

Key Terms

Principles of Macroeconomics 3eKey Terms

Key Terms

business cycle
the economy's relatively short-term movement in and out of recession
depreciation
the process by which capital ages over time and therefore loses its value
depression
an especially lengthy and deep decline in output
double counting
a potential mistake to avoid in measuring GDP, in which output is counted more than once as it travels through the stages of production
durable good
long-lasting good like a car or a refrigerator
exchange rate
the price of one currency in terms of another currency
final good and service
output used directly for consumption, investment, government, and trade purposes; contrast with “intermediate good”
GDP per capita
GDP divided by the population
gross domestic product (GDP)
the value of the output of all final goods and services produced within a country in a year
gross national product (GNP)
includes what is produced domestically and what is produced by domestic labor and business abroad in a year
intermediate good
output provided to other businesses at an intermediate stage of production, not for final users; contrast with “final good and service”
inventory
good that has been produced, but not yet been sold
national income
includes all income earned: wages, profits, rent, and profit income
net national product (NNP)
GNP minus depreciation
nominal value
the economic statistic actually announced at that time, not adjusted for inflation; contrast with real value
nondurable good
short-lived good like food and clothing
peak
during the business cycle, the highest point of output before a recession begins
real value
an economic statistic after it has been adjusted for inflation; contrast with nominal value
recession
a significant decline in national output
service
product which is intangible (in contrast to goods) such as entertainment, healthcare, or education
standard of living
all elements that affect people’s happiness, whether people buy or sell these elements in the market or not
structure
building used as residence, factory, office building, retail store, or for other purposes
trade balance
gap between exports and imports
trade deficit
exists when a nation's imports exceed its exports and it calculates them as imports –exports
trade surplus
exists when a nation's exports exceed its imports and it calculates them as exports – imports
trough
during the business cycle, the lowest point of output in a recession, before a recovery begins
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