Introduction to Economics GEN1704.2/ECN1101.2 L, Mussurov Altay

The process by which human labor (or “work”) is applied, usually with the help of tools and other forms of capital, to produce useful goods or services.

This is the surplus left over after a company sells its output, and pays off the cost of production (including labor costs, raw materials, and a proportional share of its capital equipment). Its calculation is. revenue – cost = profit.

A tax is considered progressive if a larger proportionate share of its total burden falls on individuals with higher average incomes.

True public goods are those which cannot be provided to one group of consumers, without being provided to any other consumers who desire them. Thus they are “non-excludable.” Examples include radio and television broadcasts, the services of a lighthouse, national security, and a clean environment. Private markets typically underinvest in the provision of public goods, since it’s very difficult to collect revenue from their consumers. More broadly, public goods can refer to any goods or services provided by government as a result of an inability of the private sector to supply those products in acceptable quantity, quality, or accessibility.

Real investment spending by government or public institutions on structures, infrastructure, machinery and equipment, and other real capital.

The value of total gross domestic product (that is, all the goods and services produced for money in the economy) adjusted for the effects of inflation. In theory, real GDP represents the physical quantity of output.

The interest rate on a loan, adjusted for the rate of inflation. The real interest rate represents the real burden of an interest payment. Real interest rates must be positive for the lender to attain any real income from the loan.

The value of wages, adjusted for the level of consumer prices. If the nominal value of wages is growing faster than consumer prices, then real wages are growing, and hence the real consumption possibilities offered to workers are improving.

A condition in which the total real GDP of an economy shrinks (usually, for at least two consecutive quarters).

A condition in which real GDP begins to grow again, following a recession.