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specifically for Prof. Jones' Econ 222 class at Cal Poly

savings (S)

income not spent

average propensity to save (APS)

savings rate, the percent of disposable income used for savings, also the the slope of S as a function of Yd

average propensity to consume (APC)

percent of disposible income used for consumption, also the slope of C as a function of Yd


negative savings (current C > current Yd)

aggregate demand (AD)

theoretical composite purchases as a function of price level (P)

price indexes

numerical gauges that show the change in the average price level relative to some base period (ex. CPI, PPI, IPD, etc)

core index

any price index that excludes volatile prices such as oil/energy and food


decrease in the inflation rate where price level rises but at a decreased rate


stunted growth in GDP with inflation


caused by or related to


unrelated to or unaffected by


causing increases in output and employment


causing decreases in output and employment


causing increases in the price level


causing decreases in the price level

equilibrium level of national income/output (Ye)

level of Y at which AS = AE and net change in inventories = 0, economy is at rest since there is no pressure to expand or contract

disequilibrium level of national income/output

any level of Y other than Ye, net change in inventories is not equal to 0, economy feels pressure to expand or contract

full-employment level of national income/output (Y*)

level of output at which the economy achieves full employment(NAIRU)

marginal propensity to withdraw (MPW)

percentage of a change in national income used for S+T+M (savings, taxes, imports), also the slope of W

marginal propensity to spend (z)

percentage of change in national income used for spending, also the slope of AE

labor force/work force/labor pool

4 types: full time paid, part time paid (1+hr/wk), volunteers >= 15hrs/wk, involuntarily unemployed

unemployment rate (U)

# people involuntarily out of work looking for jop / labor force (round to .1 place)

discouraged unemployed

looking for job but unable to find and taking a break from looking

full employment unemployment rate (NAIRU-non accelerating inflation rate of unemployment)

lowest rate of unemployment realistically achieveable given no cyclical unemployment, virtually no structural unemployment and minimal frictional unemployment

premature inflation

all increases in price level prior to attainment of full employment, includes cost/push, profit/push, structural inflation

pure inflation

all increases in price level which occur at full-employment, demand/pull inflation caused by excess AEs beyond capacity of economy to produce is a form of pure inflation

structural inflations

caused by a shift in demand

cost-push inflation

caused by firms shifting increased costs onto consumers

ratchet effect

reluctance of price level to fall despite decreases in output and employment, businesses more likely to lay off workers/reduce output than lower prices

cost of living adjustment (COLA)

incomes keep pace with inflation according to this


increases in real GDP over time


decreases in real GDP over time


long term decreases in GDP


long term increases in GDP


phase of business cycle which has full employment GDP and pure inflation (range 3)


goods which have a usable lifespan of 1-3 yrs, tend to be produced/sold based on business cycle


goods which have a usable lifespand of less than 1-3 yrs, tend to be produced/sold constantly

work week

average number of hours worked per week, tends to be cyclical

profit-push inflation

form of cost-push inflation (range2), considered healthy for economy since firms increase employees and output

index of leading economic indicators (LEI)

prediction gauge of economic activity 6-9 months in advance, composed of Commerce Department tracks leading, coincident, lagging economic indicators

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