Macroeconomics Review

Flashcards covering important vocabulary terms and concepts from the macroeconomics review.

Macroeconomics

The study of aggregate economic behavior of the economy as a whole.

GDP

Total output (goods + services) produced in an economy during a given time period.

Real GDP

Inflation-adjusted GDP used to assess economic performance over time.

Nominal GDP

Measured in current prices without adjusting for inflation.

Unemployment Rate

The percentage of the labor force that is unemployed and actively seeking work.

Categories of Unemployment

1. Seasonal, 2. Frictional, 3. Structural, 4. Cyclical.

Optimal Rate of Unemployment

The ideal unemployment rate that is typically between 4-6%.

Nominal Income

Income received in a time period measured in current dollars.

Real Income

Income that has been adjusted for inflation.

Inflation

The rate at which the general level of prices for goods and services rises.

Aggregate Demand (AD)

Total quantity of output demanded at alternative price levels.

Aggregate Supply (AS)

Total output producers are willing to supply at different prices.

Multiplier Effect

The concept that an initial change in spending will lead to a greater overall change in the economy.

Fiscal Policy

Government taxes and spending to alter macroeconomic outcomes.

Functions of Money

Medium of exchange, store of value, standard of value.

Basic Money Supply (M1)

Currency in circulation, transaction-account balances, and travelers checks.

Bank Reserves

The amount of funds that a bank holds in cash to meet the withdrawal demands of its customers.

Federal Reserve System

The central banking system of the United States, responsible for monetary policy.

Monetary Policy

The use of money and credit controls to influence macroeconomics.

Required Reserve Ratio

The fraction of deposits that a bank is required to keep as reserves.