Key Terms

Key Terms

business cycle
the relatively short-term movement of the economy in and out of recession
the process by which capital ages over time and therefore loses its value
an especially lengthy and deep decline in output
double counting
a potential mistake to be avoided in measuring GDP, in which output is counted more than once as it travels through the stages of production
durable good
a 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 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
goods that have been produced but not yet been sold
national income
includes all income earned: wages, profits, rent, and profit income
net national product (NNP)
GDP minus depreciation
nominal value
the economic statistic actually announced at that time, not adjusted for inflation; contrast with real value
nondurable good
a short-lived good like food and clothing
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
a significant decline in national output
a product that is intangible (in contrast to goods) such as entertainment, healthcare, or education
standard of living
all elements that affect people’s happiness, whether these elements are bought and sold in the market or not
a building used as a residence, factory, office building, retail store, or other facility
trade balance
the gap between exports and imports
trade deficit
exists when a nation's imports exceed its exports and is calculated as imports–exports
trade surplus
exists when a nation's exports exceed its imports and is calculated as exports–imports
during the business cycle, the lowest point of output in a recession, before a recovery begins