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Economics Review
Gross Domestic Product
A measure of economic activity within a country.
Gross Domestic Product (GDP) is a measure of
National Income. It is the total value of all goods
and services produced over a given time period
(usually a year) excluding net property income
from abroad. It can be measured either as the
total of income, expenditure or output.
http://en.wikipedia.org/wiki/List_of_countries_by
_GDP_(nominal)
http://en.wikipedia.org/wiki/List_of_countries_by
_GDP_(nominal)_per_capita
Inflation
The rise in general prices and the reduction in
value of money. Inflation is a sustained increase
in the general price level. In other words it is the
rate at which prices are increasing. It can be
measured either monthly, quarterly or annually.
It is usually measured by the Consumer Price
Index.
http://www.inflationdata.com/inflation/Inflation_R
ate/CurrentInflation.asp
Consumer Price Index
The term for a hypothetical basket of
goods and services purchased by
consumers. Changes in the overall price of
the basket become a measure of inflation.
http://www.bls.gov/CPI/
*Look at average price data
Cost Push Inflation
When a cost of production (e.g. wages)
increases and firms raise prices to
maintain profits. Cost increases may
happen because wages have gone up or
because raw material prices have
increased. It is important not to confuse
cost-push with demand-pull inflation. Costpush inflation happens when costs have
risen independently of demand.
Demand Pull Inflation
Occurs when aggregate demand exceeds
aggregate supply. If there is an excess
level of demand in the economy, this will
tend to cause prices to rise. Demand-pull
inflation is essentially 'too much money
chasing too few goods.'
Deflation
A reduction in national income and output.
Recession
A period of negative economic growth at the trough of the
trade cycle. A recession is usually defined as two
consecutive quarters of negative economic growth.
Depression
A depression is a severe downturn in
economic activity. These are considerably
worse than recessions.
Full Employment
Full employment occurs when everyone in
the economy who is willing to work at the
current market rate for someone of his
skills have jobs. Full employment does not
imply that all adults have jobs.
5% Unemployment is generally considered
to be Full Employment
Current U.S. 5.5% WI 4.2-4.4%
https://www.google.com/webhp?sourceid=chrome-instant&ion=1&espv=2&ie=UTF8#q=current+unemployment+wisconsin
Unemployment
Frictional- between jobs
Cyclical- decline in business cycle
Seasonal- caused by change in season
Structural- new technology makes job
obsolete
Price War/Destructive Competition
A series of price reductions that may
become so drastic that each seller
involved suffers considerable losses.
Collusion
Agreements between firms to restrict
competition.
Companies work together instead of
competing so that they can keep prices
artificially higher than the true equilibrium
price.
Progressive Tax
A tax on income in which the proportion of
tax paid relative to income increases as
income increases.
Income Tax
http://www.whitehouse.gov/2011taxreceipt?utm_source=email151&utm_medium=text1&utm_campai
gn=taxes
http://www.10taxquestions.com/articles.php?aid=3
http://www.efile.com/tax-service/tax-calculator/tax-brackets/
http://www.gggcpas.com/index.cfm/page/Will-Your-ItemizedDeductions-Raise-a-Red-Flag-with-the-IRS/cdid/11153/pid/10403
Progressive Tax
Supporters
-Marginal Sacrifice
-More Revenue
-More Opportunity for
lower and middle
class
-Prevent concentration
at the top
-Reduce inequality
Critics
-Unequal treatment of
wealthy citizens
-Complexity of system
-Encourages tax
avoidance
strategies.
-Lack of return (pay
more to get same
services)
Regressive Tax
A tax that takes a larger share of a small
income than of a large income.
Sales Tax
http://www.edlotterman.com/?s=regressive
+tax
– Taxing Groceries
– Tax Evaders
Flat Tax/Proportional Tax
A tax on income where the proportion of
tax paid relative to income does not
change as income changes.
A person making 200,000 pays the same
percentage of income as a person making
20,000.
Tax Incentive
A provision in tax law intended to stimulate
economic activity by encouraging
businesses to invest in new capital.
Energy Efficiency tax credits and rebates.
– Buy a House
– Energy Efficiency Tax Credits
– Electric vehicles
Deficit
When government expenditure exceeds
government income.
National Debt
The total amount owed by central government
which has accumulated over time. The National
Debt is therefore the total amount of borrowing
accumulated by the government that is still
outstanding. It is the total amount that the
government owes to individuals and institutions.
http://www.brillig.com/debt_clock/
http://www.babylontoday.com/national_debt_clo
ck.htm
http://zfacts.com/p/461.html
http://www.usdebtclock.org/
Gender Wage Gap
The difference in pay between men and
women for doing the same job.
http://www.infoplease.com/ipa/A0882775.h
tml
There is a lot of debate between Liberals
and Conservatives surrounding the issue
of a gender wage gap.
Federal Reserve
Nations Central Bank
Monetary Policy
The use by government of changes in the supply of money and interest
rates to achieve desired economic policy objectives. They aim therefore to
influence the level of economic activity. The government may want to use
their monetary policy to either boost economic activity (if the economy is in
a recession) or perhaps to reduce economic activity (if the economy is
growing too fast, causing inflation). If they want to slow down the economy
they may use contractionary (or deflationary) monetary policy. This is likely
to mean:
1...increasing the level of interest rates
2...reducing the rate of growth of the money supply
On the other hand if they want to boost the economy because it is in a
downturn, they may choose to use expansionary (or inflationary) monetary
policy. This would mean:
1...reducing the level of interest rates
2...allowing the rate of growth of the money supply to increase
Discount Rate
The interest rate charged by the Federal
Reserve for loans to member banks.
Current Discount Rate is 1.0
– Typically moves up or down by .25
Easy Money Policy
Government methods, such as reduced
interest rates, to expand economy’s
money supply.
Tight Money Policy
Government methods, such as increased
interest rates, designed to reduce the
economy’s money supply.
Fiscal Policy
The stance taken by government with regard to its spending or
taxation with a view to influencing the level of economic activity. An
expansionary (or inflationary) fiscal policy could mean:
1...cutting levels of direct or indirect tax
2...increasing government expenditure
The effect of these policies would be to encourage more spending
and boost the economy. A contractionary (or deflationary) fiscal
policy could be:
1...increasing taxation - either direct or indirect
2...cutting government expenditure
These policies would reduce the level of demand in the economy
and help to reduce inflation.
Comparative Advantage
This exists when a country produces a
good or service at a lower opportunity cost
than its trading partners.
Absolute Advantage
Exists when a country can produce more
of a product per resource unit than another
country. It is a basis for trade. A country
with an absolute advantage is producing
more efficiently than another.
Trade Deficit
A condition in international trade in which
the value of a nation’s imports from
another country exceeds the value of its
exports to that particular country.
http://www.americaneconomicalert.org/ticker_home.asp
Profit/Loss on Stock
Sale Price – Purchase Price = Profit/Loss
Bought 1 share for $10 and sold it for $15
$15 – $10 = $5 Profit per share
If I bought 100 shares of the same stock my total
profit would be $500
$5 per share profit X 100 shares = $500
Websites used for this PPT
http://www.bized.co.uk/glossary/econglos.
htm
http://economics.about.com/cs/econometri
cs/l/blglossary.htm