Glossary: Macroeconomic Measures of Performance

adverse selection of wage cuts argument
if employers reduce wages for all workers, the best will leave
cyclical unemployment
unemployment closely tied to the business cycle, like higher unemployment during a recession
depreciation
the process by which capital ages over time and therefore loses its value
discouraged workers
those who have stopped looking for employment due to the lack of suitable positions available
double counting
a potential mistake to be avoided in measuring GDP, in which output is counted more than once as it travels through the stages of production
durable good
long-lasting good like a car or a refrigerator
efficiency wage theory
the theory that the productivity of workers, either individually or as a group, will increase if they are paid more
final good and service
output used directly for consumption, investment, government, and trade purposes; contrast with “intermediate good”
frictional unemployment
unemployment that occurs as workers move between jobs
gross domestic product (GDP)
the value of the output of all goods and services produced within a country in a year
gross national product (GNP)
includes what is produced domestically and what is produced by domestic labor and business abroad in a year
implicit contract
an unwritten agreement in the labor market that the employer will try to keep wages from falling when the economy is weak or the business is having trouble, and the employee will not expect huge salary increases when the economy or the business is strong
insider-outsider model
those already working for the firm are “insiders” who know the procedures; the other workers are “outsiders” who are recent or prospective hires
intermediate good
output provided to other businesses at an intermediate stage of production, not for final users; contrast with “final good and service”
inventory
good that has been produced, but not yet been sold
labor force participation rate
this is the percentage of adults in an economy who are either employed or who are unemployed and looking for a job
Lorenz curve
a graph that compares the cumulative income actually received to a perfectly equal distribution of income; it shows the share of population on the horizontal axis and the cumulative percentage of total income received on the vertical axis
national income
includes all income earned: wages, profits, rent, and profit income
natural rate of unemployment
the unemployment rate that would exist in a growing and healthy economy from the combination of economic, social, and political factors that exist at a given time
net national product (NNP)
GNP minus depreciation
nondurable good
short-lived good like food and clothing
out of the labor force
those who are not working and not looking for work—whether they want employment or not; also termed “not in the labor force”
relative wage coordination argument
across-the-board wage cuts are hard for an economy to implement, and workers fight against them
service
product which is intangible (in contrast to goods) such as entertainment, healthcare, or education
structure
building used as residence, factory, office building, retail store, or for other purposes
structural unemployment
unemployment that occurs because individuals lack skills valued by employers
trade balance
gap between exports and imports
trade deficit
exists when a nation’s imports exceed its exports and is calculated as imports –exports
trade surplus
exists when a nation’s exports exceed its imports and is calculated as exports – imports
underemployed
individuals who are employed in a job that is below their skills
unemployment rate
the percentage of adults who are in the labor force and thus seeking jobs, but who do not have jobs
quintile
dividing a group into fifths, a method often used to look at distribution of income