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chapter+4+_10_+09-04-08

chapter+4+_10_+09-04-08 - 1 Macroeconomics as a Second...

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1 Macroeconomics as a Second Language Chapter 4 (10): Measuring the Macroeconomy Martha L. Olney [email protected] September 4, 2008 Before we can tell stories about the macroeconomy, we need to know what is happening in it. What terms do economists use to describe the macroeconomy? How are those things measured? How has the United States economy performed over the last century? In this chapter, we focus on these questions. Key terms and concepts $ John Maynard Keynes $ National Income and Product Accounts $ NIPA $ Output $ Income $ Expenditure $ Employed 4 - 1
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$ Unemployed $ Amount of Output $ Gross Domestic Product $ GDP $ Nondurable Goods $ Services $ Durable Goods $ The Underground Economy $ Gross National Product $ GNP $ Bureau of Economic Analysis $ Sigma $ Nominal GDP $ GDP in Current Dollars $ Real GDP $ Base Year $ GDP in Constant Dollars $ GDP in Chained Dollars $ Rate of Change of Real GDP $ Trend Line 4 - 2
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$ Trend Rate of Growth $ Linear Scale $ Logarithmic Scale $ Long-run Growth $ Short-run Fluctuations $ Long Run $ Short Run $ Medium Run $ Standard of Living $ Real GDP per Capita $ Growth $ Stagnation $ Decline $ Recession $ Recovery $ Trough $ Peak $ Growth Recession $ Depression $ Household Survey 4 - 3
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$ Bureau of Labor Statistics $ Civilian Labor Force $ Out of the Labor Force $ Marginally Attached to the Labor Force $ Discouraged Worker $ Unemployment Rate $ Labor Force Participation Rate $ Frictional Unemployment $ Structural Unemployment $ Cyclical Unemployment $ Full Employment $ Seasonal Unemployment $ Seasonally Adjusted Key equations $ Rate of Change $ Unemployment Rate $ Labor Force Participation Rate $ Consumer Price Index 4 - 4
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$ GDP Deflator Some History of Macroeconomics The worst economy of modern times occurred during the 1930s in what we now call the Great Depression. Millions of people could not find work. Families lost their houses. Workers lost their jobs. Bankers lost their banks. It was worse than you or I can probably imagine. And yet the big question was “Why?” Why is this happening? Why are so many people out of work, hungry, poor? That is the key question of macroeconomics. At the time, there was no widely accepted answer. In many ways, macroeconomic theory began in 1936 with the publication of The General Theory of Employment, Interest, and Money by John Maynard Keynes . (Keynes rhymes with “brains.”) Keynes, a British economist, offered an explanation for the dire straits economies experienced during the Great Depression. Why were so many workers out of work? Keynes offered a story that went essentially like this: To understand why so many are out of work, we need to understand why so few people have jobs. People have jobs when there is output to produce. There is output to produce when someone wants to buy that output. So if lots of people are out of work, then there must be insufficient spending.
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