Unit 4: National and Global Economies (Entire Unit)

fiscal policy

government policy regarding taxing and spending

monetary policy

central bank policy aimed at regulating the amount of money in circulation.

deficit spending

government spending in excess of what is collected in revenues

stagflation

a combination of economic stagnation --or slow down-- and high inflation. During this period the gross domestic product growth is slow or zero, unemployment is high, and prices are rising.

multiplier effect

a ripple effect in which a change in spending by one person or business leads to additional changes in spending by another person or business

easy-money policy

a monetary policy designed to accelerate the rate of growth of the money supply in order to stimulate economic growth

tight-money policy

a monetary policy designed to slow the rate of growth of the money supply in order to reduce inflation

crowding-out effect

the possible effect of increased government borrowing on businesses and consumers. By driving interest rates up, high levels of government borrowing may push private borrowers out of the lending market

inflation

an increase in the overall price level of goods and services produced in an economy

economic indicators

statistics that help economists judge the health of the economy

gross domestic product (GDP)

the market value of all final goods and services produced within a country in a given period of time

unemployment rate

the percentage of the labor force that is not employed but is actively seeking work

inflation rate

the percentage increase in the average price level of goods and services from one month or year to the next

consumer price index (CPI)

a measure of price changes in consumer goods and services (tracks inflation). It shows the cost of living over time.

business cycle

a recurring pattern of growth and decline in economic activity over time

recession

a period of declining national economic activity, usually measured as a decrease of GDP for at least two consecutive quarters (six months)

foreign debt

the part of a country's total debt that is owed to creditors of other nations. Government, businesses, or individuals can owe debt. Creditors can be foreign banks, governments, or financial institutions.

debt forgiveness

the cancellation of all or part of a debt.

capital flow

the movement of money into and out of a country through foreign investment and other financial activities.

economic development

the process by which a country makes economic progress and raises its standard of living. Including improvements to agriculture and industry, the building of roads and other economic infrastructure, and investments in human capital.

developed country

a wealthy, industrialized country in which the majority of people have more than enough income to meet their basic needs and maintain a high standard of living.

developing country

a low -to medium- income country in which most people have less access to goods and services than the average person in a developed country

least developed country

a country that suffers from severe poverty and low standards of living

extreme poverty

a condition in which people are too poor to meet basic survival needs, including food, shelter, and clothing.

global economy

the system of economic interaction among the countries of the world. It includes international trade as well as transfers of money, resources, and technology among countries.

imports

goods and services produced in other countries and sold domestically.

exports

goods and services produced domestically and sold in other countries.

free trade

the policy of eliminating barriers to international trade. It allows goods and services to move more freely across borders.

protectionism

the policy of erecting trade barriers to shield domestic markets from foreign competition. It limits trade.

protective tariff

a tax on imported goods designed to protect domestic producers from foreign competition. It is one form of a trade barrier.

foreign exchange

the trading of one national currency for another. (It is a necessary element of global trade)

balance of trade

the difference between the value of a country's exports and the value of its imports