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322 - test 1 study sheet - Transfer Payments payments from...

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Transfer Payments – payments from the gov. to individuals that are not in exchange for goods or services Inflation rate – measures how quickly prices are rising Exogenous variables – variables that the model takes as given Labor-force participation rate – percentage of adults in the labor force Inventory investment – the change in the quantity of goods that firms hold in storage, including materials and supplies, works in process and finished goods. Market clearing – model that assumes that prices freely adjust to equalize supply and demand Sticky prices – prices that adjust sluggishly Business fixed investment – purchase of new plant and equipment by firms When comparing economic well being over long time use real GDP because of focus on production without the confusion of changing price levels and the use of base year prices Level of output or Y is determined by 1. Amount of capital 2. Amount of labor 3. Techonology Techonological change alters the production function
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