Real Income

2. The Labor Participation Rate is the number of individuals who are willing to work, are working, or are actively looking for work (Investopedia, 2005).

3. Structural Unemployment occurs if consumers change the goods they buy, thereby reducing jobs previously available in producing the goods they no longer want, but increasing jobs elsewhere; or technological progress makes the skills of some wnrkers obsolete (Wessels, 2000, 87).

4. National Income is the total value of a nation's income in one year (Definitions, 2005).

5. An Intermediate Good is one whose demand goes up as income increases (Wessels, 2000, 49-50).

6. The consumer Price Index (CPI) measures the cost of a market basket of consumer goods and services (Wessels, 2000, 78-80). It is updated every two years, and is based on a period two years before that. The formula for calculating the CPI is:

Cost of basket in Present year x 100

For example, if the basket cost $6000 in 2004, and cost $3000 in

7. If the CPI is 144.3 in one year, and 158.1 in the next year,

Inflation rate = 9.5 percent (Wessels, 2000, 78)

8. The gross domestic product (GDP) can

. . .
t by which a government's budget receipts (t`x revenues) exceeds its budget outlays for a given budget/fiscal year (Definition, 2005). 2. Contractionary Fiscal Policy is a government policy of reducing spending and raising taxes (Contractionary, 2005). It shifts the investment/savings curve to the left. 3. The Laffer Curve is used to justify tax cuts because as taxes increase, tax revenue for the government increases, but there comes a point when people begin to work and earn less because it is not worth their while to work more when it just means paying higher taxes (Wessels, 2000, 174). The lack of incentive leads to a fall in tax revenues. The curve shows that as the marginal tax rate increases, total tax revenues first increase and then fall off as the marginal rate becomes excessive (564). 4. Regressive Income Tax is a tax on income at a marginal rate that decreases with the level of income (Definition, 2005). 5. A Cyclical Deficit is a budget deficit that is present only because the Real GDP is less than the Potential GDP and taxes are temporarily low and transfer payments are temporarily high (Definition, 2005). Part B 6. In economics, crowding occurs when the government is borrowing heavily while busine
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Some common words found in the essay are:
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Approximate Word count = 3261
Approximate Pages = 13 (250 words per page)

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