Output which is not consumed, but is set aside for use in future production;
expectations: Expectations about the future which are formed by examining
the recent past.
R square: A goodness of fit measurement; measures the percent of the dependent
variable’s variation that is explained by movement of the independent variable
in a linear
Adjusted R square is similar to R square but is adjusted for the number of
year: The year that is used as a standard of comparison in a time series
index number, such as the CPI.
flow: A schematic diagram that shows the sub-components of output and
the flow of incomes generated in production.
price index (CPI): A measure of the level of prices for final goods and
services purchased by the typical consumer household.
The largest component of GDP when it is measured by adding up expenditures.
A measure of linear association between two variables.
side model: An economic model that focuses mainly on movements in aggregate
demand, and views them as the source of most of the variation in economic
The machines and other equipment that are worn out in the process of production.
model: A model in which outcomes are precisely determined without any
room for random variation.
in means test: A test of whether two different samples are drawn from
the same population; if they are, then differences in the sample averages
are not likely to be very great.
Profit income earned by stockholders.
Goods and services produced in one country but sold in another.
goods and services: Goods and services that are consumed or used to produce
other goods and services.
institutions: Businesses that pool the savings of households and make
them available to businesses that wish to borrow.
sector: Purchasers of our exports, suppliers of our imports.
Milton: Nobel prize winning conservative economist that argued against
Keynesian economics and helped to revitalize monetarism.
domestic product (GDP): The market value of all final goods and services
produced inside a nation in a year.
deflator: The price index used to measure inflation in the price of goods
and services that make up GDP.
national product (GNP): The market value of all final goods and services
produced with the factors of production owned by a nation in a year.
Goods and services made abroad and sold here.
The flow of payments received for the supply of land, labor, and/or capital.
number: A number set equal to 100 in the base year, and used to measure
changes in prices or quantities.
business taxes: Taxes paid on goods, such as sales taxes, import tariffs
and excise taxes.
The percentage change in the price index; a general rise in prices.
Income earned on money lent.
goods and services: Goods and services used as inputs into the production
of other goods and services.
Accumulation; setting aside part of this period’s output in order to expand
the economy’s capacity to produce in the future.
Maynard: The leading macro-economic theorist of the 20th century, Keynes
showed how governments could use their spending and taxing powers to combat
force: Residents of a nation that are 16 or older, non-institutionalized,
and either working or actively seeking work.
faire: Free market economics with a minimum of government intervention.
The ease with which an asset can be spent.
A measure of central tendency equal to the sum of all the observations divided
by the number of observations.
M1 or M2; M1 is cash, coin, traveler’s checks and checking account balances;
M2 is M1 plus household savings accounts and money market accounts.
income: The sum of wages and salaries, interest income, rental income,
dividends and profit income.
income and product accounts (NIPA): The system used to record a nation’s
total output and income.
rate of unemployment: The rate of unemployment which is associated with
a constant (unchanging) rate of inflation.
economics: The mainstream school of economics that tends to view the macroeconomy
has self equilibrating at the natural rate of unemployment.
economics: The current day descendants of Keynes; neo-Keynesians tend
to view the economy as capable of getting stuck in recessions for prolonged
periods of time.
rate of interest: The rate charged by banks or other lenders; unadjusted
inflation rate of unemployment (NAIRU): Another term for the natural rate
hypothesis: The primary hypothesis being investigated; often it is an
hypothesis that there is no difference between two values, or that a sample
value is not different from zero.
Law: The "law" states that increases in economic growth are associated
with decreases in unemployment.
investment: Purchase of financial assets such as stocks and bonds by a
household or individual.
curve: The negative relationship between the change in the rate of inflation
model: A model which allows for a random, probabilistic element in the
relationship between two or more variables.
price index (PPI): An index number used to measure prices of the
intermediate and final goods and services that businesses buy.
The probability of getting a particular value of a test statistic, or a larger
value, when the null hypothesis is true.
error term: A residual measure of the non-deterministic part of the relationship
between two or more variables at a particular point in time.
expectations: The process of forming expectations about the future by
gathering all readily available information.
rate of interest: The inflation adjusted rate, equal to the nominal rate
minus the expected rate of inflation.
A statistical technique for estimating the best fitting line through a series
of data points in a scatter plot.
Income earned by the letting of land.
profits: Profit income earned that is not paid out to stockholders.
square: A goodness of fit measure that tells the percent of the variation
in one variable that is explained by movement in another variable.
plot: A graph of pairs of values.
Recession (stagnation) plus inflation.
error of the estimate: A measure of the accuracy of a sample statistic
such as a mean of a regression coefficient.
deviation: A measure of dispersion which is a function of the sum of the
squared deviations of values from the mean. The standard deviation is calculated
as the square root of the variance.
model: see probabilistic model.
and flow variables: Variables which are measured at a point in time (stock)
or over a period of time (flow).
side economics: The belief that taxes and regulations form such a large
burden on the economy that it significantly stifles economic growth.
payments: Payments received which are not in return for providing a goods
or service; transfer payments are a redistribution of income.
A small sample test statistic which is based on the student’s t distribution;
as the sample gets large, the t statistic approaches the normal distribution.
Without a job and seeking work.
A measure of dispersion which is equal to the average of the square of the
deviations of variables from their mean.
and salaries: income receive for the supply of labor.
The accumulation of all past savings which have not been spent.
Last Modified 14 August 1998