*Last Modified 14 August 1998*

accumulation:

Output which is not consumed, but is set aside for use in future production;

investment.

adaptive: Expectations about the future which are formed by examining

expectations

the recent past.

adjusted: A goodness of fit measurement; measures the percent of the dependent

R square

variable’s variation that is explained by movement of the independent variable

in a linear

regression.

Adjusted R square is similar to R square but is adjusted for the number of

independent variables.

base: The year that is used as a standard of comparison in a time series

year

index number, such as the CPI.

circular: A schematic diagram that shows the sub-components of output and

flow

the flow of incomes generated in production.

consumer(CPI): A measure of the level of prices for final goods and

price index

services purchased by the typical consumer household.

consumption:

The largest component of GDP when it is measured by adding up expenditures.

correlation:

A measure of linear association between two variables.

demand: An economic model that focuses mainly on movements in aggregate

side model

demand, and views them as the source of most of the variation in economic

activity.

depreciation:

The machines and other equipment that are worn out in the process of production.

deterministic: A model in which outcomes are precisely determined without any

model

room for random variation.

difference: A test of whether two different samples are drawn from

in means test

the same population; if they are, then differences in the sample averages

are not likely to be very great.

dividends:

Profit income earned by stockholders.

exports:

Goods and services produced in one country but sold in another.

final: Goods and services that are consumed or used to produce

goods and services

other goods and services.

financial: Businesses that pool the savings of households and make

institutions

them available to businesses that wish to borrow.

foreign: Purchasers of our exports, suppliers of our imports.

sector

Friedman,: Nobel prize winning conservative economist that argued against

Milton

Keynesian economics and helped to revitalize monetarism.

gross(GDP): The market value of all final goods and services

domestic product

produced inside a nation in a year.

GDP: The price index used to measure inflation in the price of goods

deflator

and services that make up GDP.

gross(GNP): The market value of all final goods and services

national product

produced with the factors of production owned by a nation in a year.

imports:

Goods and services made abroad and sold here.

income:

The flow of payments received for the supply of land, labor, and/or capital.

index: A number set equal to 100 in the base year, and used to measure

number

changes in prices or quantities.

indirect: Taxes paid on goods, such as sales taxes, import tariffs

business taxes

and excise taxes.

inflation:

The percentage change in the price index; a general rise in prices.

interest:

Income earned on money lent.

intermediate: Goods and services used as inputs into the production

goods and services

of other goods and services.

investment:

Accumulation; setting aside part of this period’s output in order to expand

the economy’s capacity to produce in the future.

Keynes, John: The leading macro-economic theorist of the 20th century, Keynes

Maynard

showed how governments could use their spending and taxing powers to combat

recessions.

labor: Residents of a nation that are 16 or older, non-institutionalized,

force

and either working or actively seeking work.

Free market economics with a minimum of government intervention.laissez:

faire

liquidity:

The ease with which an asset can be spent.

mean:

A measure of central tendency equal to the sum of all the observations divided

by the number of observations.

money:

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.

national: The sum of wages and salaries, interest income, rental income,

income

dividends and profit income.

national: The system used to record a nation’s

income and product accounts (NIPA)

total output and income.

natural: The rate of unemployment which is associated with

rate of unemployment

a constant (unchanging) rate of inflation.

neoclassical: The mainstream school of economics that tends to view the macroeconomy

economics

has self equilibrating at the natural rate of unemployment.

neo-Keynesian: The current day descendants of Keynes; neo-Keynesians tend

economics

to view the economy as capable of getting stuck in recessions for prolonged

periods of time.

nominal: The rate charged by banks or other lenders; unadjusted

rate of interest

for inflation.

non-acceleratingof unemployment (NAIRU): Another term for the natural rate

inflation rate

of unemployment.

null: The primary hypothesis being investigated; often it is an

hypothesis

hypothesis that there is no difference between two values, or that a sample

value is not different from zero.

Okun’s: The "law" states that increases in economic growth are associated

Law

with decreases in unemployment.

personal: Purchase of financial assets such as stocks and bonds by a

investment

household or individual.

Phillips: The negative relationship between the change in the rate of inflation

curve

and unemployment.

probabilistic: A model which allows for a random, probabilistic element in the

model

relationship between two or more variables.

producer

price index(PPI): An index number used to measure prices of the

intermediate and final goods and services that businesses buy.

p-value:

The probability of getting a particular value of a test statistic, or a larger

value, when the null hypothesis is true.

random: A residual measure of the non-deterministic part of the relationship

error term

between two or more variables at a particular point in time.

rational: The process of forming expectations about the future by

expectations

gathering all readily available information.

real: The inflation adjusted rate, equal to the nominal rate

rate of interest

minus the expected rate of inflation.

regression:

A statistical technique for estimating the best fitting line through a series

of data points in a scatter plot.

rent:

Income earned by the letting of land.

retained: Profit income earned that is not paid out to stockholders.

profits

R: A goodness of fit measure that tells the percent of the variation

square

in one variable that is explained by movement in another variable.

scatter: A graph of pairs of values.

plot

stagflation:

Recession (stagnation) plus inflation.

standard: A measure of the accuracy of a sample statistic

error of the estimate

such as a mean of a regression coefficient.

standard: A measure of dispersion which is a function of the sum of the

deviation

squared deviations of values from the mean. The standard deviation is calculated

as the square root of the variance.

stochastic: see probabilistic model.

model

stock: Variables which are measured at a point in time (stock)

and flow variables

or over a period of time (flow).

supply: The belief that taxes and regulations form such a large

side economics

burden on the economy that it significantly stifles economic growth.

transfer: Payments received which are not in return for providing a goods

payments

or service; transfer payments are a redistribution of income.

t-statistic:

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.

unemployment:

Without a job and seeking work.

variance:

A measure of dispersion which is equal to the average of the square of the

deviations of variables from their mean.

wages: income receive for the supply of labor.

and salaries

wealth:

The accumulation of all past savings which have not been spent.