AP_Krugman_Textbook

150 section 3 Measurement of Economic Performance

Final goods and services, p. 106

Intermediate goods and services, p. 106

Gross domestic product (GDP), p. 106

Aggregate spending, p. 106

Value added, p. 107

Net exports, p. 108

Aggregate output, p. 113

Real GDP, p. 114

Nominal GDP, p. 114

Chain-linking, p. 115

GDP per capita, p. 115

Employed, p. 119

Unemployed, p. 119

Labor force, p. 119

Labor force participation rate, p. 119

Unemployment rate, p. 119

Discouraged workers, p. 120

Marginally attached workers, p. 120

Underemployed, p. 120

Job search, p. 127

Frictional unemployment, p. 127

Structural unemployment, p. 128

Efficiency wages, p. 130

Natural rate of unemployment, p. 130

Cyclical unemployment, p. 130

Real wage, p. 135

Real income, p. 135

Inflation rate, p. 135

Shoe -leather costs, p. 137

Menu costs, p. 137

Unit -of -account costs, p. 137

Nominal interest rate, p. 138

Real interest rate, p. 138

Disinflation, p. 139

Aggregate price level, p. 142

Market basket, p. 142

Price index, p. 143

Consumer price index (CPI), p. 144

Producer price index (PPI), p. 145

GDP deflator, p. 146

Key Terms

National income and product accounts, p. 102

National accounts, p. 102

Household, p. 103

Firm, p. 103

Product markets, p. 103

Factor markets, p. 103

Consumer spending, p. 103

Stock, p. 104

Bond, p. 104

Government transfers, p. 105

Disposable income, p. 105

Private savings, p. 105

Financial markets, p. 105

Government borrowing, p. 105

Government purchases of goods and services,

p. 105

Exports, p. 105

Imports, p. 105

Inventories, p. 105

Investment spending, p. 106

1.At right is a simplified circular-flow diagram for the

economy of Micronia.

a.What is the value of GDP in Micronia?

b.What is the value of net exports?

c.What is the value of disposable income?

d.Does the total flow of money out of house-

holds—the sum of taxes paid and consumer

spending—equal the total flow of money into

households?

e.How does the government of Micronia finance

its purchases of goods and services?

Problems

Government purchases of

goods and services = $100

Consumer

spending = $650

Imports = $20

Exports = $20

Wages, profit,

interest,

rent = $750

Gross

domestic

product

Wages,

profit,

interest,

rent = $750

Government

Households

Taxes = $100

Markets for goods

and services

Factor

markets

Firms

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