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ECO1102 Definitions for Final .docx

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University of Ottawa
David Gray

Econ Final Definitions Chapter 5 Microeconomics • The study of how individuals and firms make decisions and interact within the market Macroeconomics • The economy wide phenomena including inflation, economic growth and unemployment • Studies the economy as a whole • Goal is to explain the economic changes that affect many households, firms, and markets simultaneously Gross Domestic Product • Is the market value of all final goods and services produced within a country in a given period of time Consumption • Spending by households on goods and services • “goods” include household spending on durable goods such as cars and appliances and nondurable goods such as food and clothing • “services” include intangible items such as haircuts • household spending on post secondary is also counted in consumption Investment • purchase of goods that will be used in the future to produce more goods and services • it is the sum of purchases of capital equipment, inventories and structures • investment in structures includes expenditures on new housing Government Purchases • include spending on goods and services by local, territorial, provincial and federal governments • it includes salaries of government workers and spending on public works Net Exports • equal the purchases of domestically produced goods by foreigners (exports) minus the domestic purchases of foreign goods (imports) Real GDP • the production of goods and services valued at constant prices Nominal GDP • the production of goods and services valued at current prices Chapter 6 The consumer price index • measures the overall cost of goods and services bought by a typical consumer Inflation Rate • the percentage change in the price index from the preceding period Core Inflation • thought to be useful in predicting the underlying trend of changes in the consumer price index Nominal Interest Rate • interest rate that measures the change in dollar amounts Real Interest Rate • interest rate corrected for inflation Chapter 7 Productivity • the quantity of goods and services that a worker can produce for each hour of work Physical capital • the stock of equipment and structures that are used to produce goods and services Human Capital • the knowledge and skills workers acquire through education, training and experience Natural Resources • inputs into production that are provided by nature such as land, rivers and mineral deposits Technological Knowledge • the understanding of the best way to produce goods and services Diminishing Returns • as the stock of capital rises, the extra output produced from an additional unit of capital falls Chapter 8 Fianacial system • costists of those institutions in the economy that help to match one person’s saving with another persons investment Financial Markets • the institutions through which as person who wants to save can directly supply funds to a person who wants to borrow Bond • a certificate of indebtedness that specifies the obligation of the borrow to the holder of the bond Stock • represents ownership in a firm and is therefore a claim to profits that the firm makes Financial Intermediaries • financial institutions through which savers can directly provide funds to borrowers Mutual Fund • an institution that sells shares to the public and uses the proceeds to buy a selection, or portfolio of various types of stocks or bonds, or both stocks or bonds Private Saving • the amount of income that households have left after paying their taxes and paying for their consumption Public Saving • the amount of tax revenue that the government has left after paying for its spending Budget Surplus • an excess of tax revenue over government spending Budget Deficit • a shortfall of tax revenue from government spending market for Loanable Finds • the market in which those who want to save supply funds and those who want to borrow to invest demand funds Government Debt • the sum of all past budget deficits and surpluses Crowding Out • a decrease in investment that results from government borrowing Vicious Circle • cycle that results when deficits reduce the supply of loanable funds, increase interest rates, discourage investment and result in slower economic growth; slower growth leads to lower tax revenue and higher spending on income support programs, and the result can be even higher budget deficits Virtuous Cycle • cycle that results when surpluses increase the supply of loanable funds, reduce interest rates, stimulate investment and result in faster economic growth; faster growth leads to higher tax revenue and lower spending on income support programs, and the result can be even higher budget surpluses Government Net Debt • the difference between the value of the government financial liabilities and financial assets Chapter 9 Labour Force • the total number of workers, including both the employed and unemployed Unemployment Rate • the percen
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