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POTENTIAL GROSS DOMESTIC PRODUCT: The total output that the economy could produce if resources were at full employment. If the economy is at full employment (a 5 percent unemployment rate) then actual gross domestic product is equal to potential gross domestic product. Of course, if the unemployment rate is greater than 5 percent, then actual production is less potential production. By calculating potential gross domestic product, we can figure out exactly how far below this potential we are. This information then can be used by the pointy-headed government economists to recommend appropriate monetary or fiscal policies.
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BALANCED-BUDGET MULTIPLIER A measure of the change in aggregate production caused by equal changes in government purchases and taxes. The balanced-budget multiplier is equal to one, meaning that the multiplier effect of a change in taxes offsets all but the initial production triggered by the change in government purchases. This multiplier is the combination of the expenditures multiplier, which measures the change in aggregate production caused by changes in an autonomous aggregate expenditure, and the tax multiplier which measures the change in aggregate production caused by changes in taxes.
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GRAY SKITTERY
[What's This?]
Today, you are likely to spend a great deal of time strolling through a department store looking to buy either a weathervane with a chicken on top or a flower arrangement with daisies and carnations for your uncle. Be on the lookout for letters from the Internal Revenue Service.
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This isn't me! What am I?
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Cyrus McCormick not only invented the reaper for harvesting grain, he also invented the installment payment for selling his reaper.
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"I much prefer the sharpest criticism of a single intelligent man to the thoughtless approval of the masses." -- Johannes Kepler, German Astronomer
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ABE
Association of Business Executives
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