Wednesday, August 10, 2016

gross national product:
total market value of all final goods & services

gross domestic product: 
total market value of all final goods & services produced w/in a country
does not include:
  • work w/in homes
  • second hand items
  • criminal activity
  • underground economies
consumer price index:
measures goods consumers buy
-purchasing power: ability to buy decreases
-positive effects: loans--> good for inflation

  • money is flowing
  • period of economic growth
  • plentiful jobs & falling unemployment
  • businesses investing in new plants, equipment, etc.
  • inflation (general rise in prices) can occur
  • real GDP stops rising
  • high production
  • height of expansion
  • going downhill
  • lower prices occur--> deflation
  • low levels of investment
  • 2 types:
1. recession: real GDP fails for 2 consecutive quarters (6-18 months)
2. depression: high unemployment

  • lowest point of economic activity
  • indicators:
1. leading- 
stock market
interest rates
orders of capital goods
2. coincident-
change w cycle
personal income
sales lagging

monetary policy: 
the federal reserve system = central bank of U.S.
roles of central bank:
  • issues bank notes
  • supervises banking institutions
  • serve as bank for government & banks
  • establishes & conducts monetary policy
  • maintains value of currency
  • acts as lender of last resort

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