EOCT Review Page 3

Chapter All goods and services produced IN a country in a given year. 2. GDP only includes goods and services produced in the country, GNP includes goods and services produced internationally but owned by an American company. 3. Nominal GDP: measures prices of goods and services ◦Real GDP: measures prices AFTER inflation has been deducted ◦Why? To measure REAL growth ◦Example: Gas sales equaled $1 billion in 1996 Gas sales equaled $3 billion in Output expenditure model: expenditures=spending. The spending of households, businesses, and government shifts the demand curve.

Chapter Peak, contraction, recession, expansion. 2. Recession: decline of national economics, usually measured by decline in real GDP for two consecutive quarters. 3. Depression: A severe, prolonged economic contraction. 4. Stagflation: economic condition characterized by both rising average price level (inflation) and a decrease in real GDP (recession)

Chapter Peak=lowest, Contraction= rising, Recession= highest, Expansion= declining. 6. Peak=highest, Contraction= declining, Recession=lowest, Expansion= rising. 7. Consumer Price Index= is an index used to calculate the inflation rate. 8. Those who have issued loans, banks, and those with savings. Increase in the money supply.

9. SEE CONSUMER PRICE INDEX. 10. Cost-push inflation is a type of inflation caused by substantial increases in the cost of important goods or services where no suitable alternative is available. (Oil) 11. Demand-pull inflation is asserted to arise when aggregate demand in an economy outpaces aggregate supply.

12. Inflation risk: money continues to lose value and thus less items can be purchased and a permanent price increase will occur. 13. types of unemployment ◦Frictional: in between jobs. ◦Structural: change in the economy or technology development that renders your job unneeded. ◦Seasonal: you are out of work due to season. (farmers0 ◦Cyclical: unemployment related to swings in the business cycle. 14. Full employment is when unemployment falls below 4%.

Chapter SEE DEMAND AND SUPPLY CURVES. 2. Aggregate supply: refers to the total quantity of all goods and services firms in an economy are willing and able to supply at each price level. 3.Aggregate demand: refers to the total quantity of all goods and services consumers are willing and able to purchase at each price level. 4. SAME AS SUPPLY 5. SAME AS DEMAND

Chapter Fiscal policy: refers to the power of the government to use government spending and taxation policy change to influence economic activity. 7. SKIP 8. Contraction: Increase money supply. Expansion: Decrease money supply.

Chapter Absolute Advantage: ability to produce MORE units than another producer. ◦Comparative Advantage: ability to produce a good at a lower opportunity cost than another producer 2. It increases productivity, Trade creates incentive to be cooperative and have peace, cheaper prices, more choices. 3. Tariffs used to reduce trade in order to protect domestic producers. Encourage domestic consumption. 4. Tariffs: Tax on imported goods to increase price.

Chapter Quotas: limit on the number of goods a country will allow to be imported. 6. Standards: Requirements of quality and safety in relation to the production of a good. 7. Embargo: blockade or refusal to trade goods with a nation. 8. Subsidies: Governments will provide financial help so citizens can afford the product 9. Balance of Payments: measures goods AND SERVICES with other countries

Chapter Trade deficit: imports exceeds exports, losing money. NO 11. North American Free Trade Agreement. USA, Mexico, Canada. PROTECTIONIST. 12. Alliance of Asian nations for free trade. 13. European Union: trade agreement between a lot of European countries. 14. Exchange Rate: Amount of one country’s currency that is equal to one unit of another’s

Chapter Weak dollar: A situation where the U.S. dollar's value is decreasing relative to one or a basket of foreign currencies. 16. Strong dollar: Dollar that can be exchanged for a large or increasing amount of foreign currency. For example, if the dollar were strong, one would expect imports to be high and exports to be low because the dollar will buy a lot in a different country while it is expensive to purchase dollars with outside curre ncies. Alternatively, with a weak dollar one would expect high exports and low imports.