Final Exam Review - Economics

Vocabulary flashcards created from the final exam review notes, covering key economic terms and concepts.

Government Purchases Multiplier

The ratio of change in GDP to the change in government spending.

Exchange Rate (e.r.) Graph

A graphical representation showing the relationship between the exchange rates and the quantity of currency demanded or supplied.

Dynamic AD AS Model

A model that describes the interaction between aggregate demand and aggregate supply over time.

Laffer Curve

A theoretical curve that illustrates the relationship between tax rates and tax revenue.

Laffer Curve Movement A to A’

Represents a situation where a decrease in tax rates leads to an increase in tax revenues.

Tax Multiplier

A measure of the effect of a change in taxes on the overall economic output.

RRR (Required Reserve Ratio)

The fraction of deposits that banks are required to hold as reserves.

Potential Real GDP

The maximum output an economy can produce without triggering inflation.

Monetary Policy

Actions taken by a central bank to control money supply and interest rates.

Fiscal Policy

Government spending and tax policies used to influence economic conditions.

Crowding Out

The phenomenon where increased government spending leads to a reduction in private sector spending.

Okun's Law

The relationship between unemployment rates and GDP, indicating that for every percentage point increase in unemployment, a country's GDP will be an estimated roughly 2% lower than its potential GDP.

NAIRU

The non-accelerating inflation rate of unemployment; the level of unemployment below which inflation rises.

Inflation Rate Calculation

The percentage increase in the price level of goods and services in an economy over a period.

Expansionary Fiscal Policy

Policy that involves increasing government spending or decreasing taxes to stimulate economic growth.

Contractionary Fiscal Policy

Policy that involves decreasing government spending or increasing taxes to slow economic growth.

Loanable Funds Market

A market where borrowers demand funds and lenders supply funds for loans.

Supply and Demand for Pesos

The interaction between the quantity of pesos supplied and demanded that determines the currency's value in foreign exchanges.

Open Economy

An economy that engages in international trade and finance.