Measuring Economic Health

These flashcards cover key vocabulary and definitions regarding the measurement of economic health, focusing on concepts such as GDP, unemployment, inflation, and related economic policies.

Gross Domestic Product (GDP)

The market value of all final goods and services produced within a country during a specific time period.

Nominal GDP

Measured using current prices and not adjusted for inflation.

Real GDP

Adjusted for inflation, showing the economy’s true growth.

Unemployment Rate

The percentage of the labor force that is unemployed.

Frictional Unemployment

Short-term unemployment occurring when workers are between jobs.

Structural Unemployment

Unemployment caused by changes in technology or the economy.

Cyclical Unemployment

Unemployment caused by economic downturns, increasing during recessions.

Seasonal Unemployment

Unemployment caused by seasonal changes in demand.

Inflation

A general increase in prices over time.

Consumer Price Index (CPI)

Measures changes in the price level of a basket of consumer goods.

Creeping Inflation

Slow and steady price increases, considered normal.

Hyperinflation

Extremely rapid price increases.

Deflation

A decrease in the general price level of goods and services.

Stagflation

A situation of high inflation and high unemployment.

Cost-Push Inflation

Inflation caused by rising costs of production.

Demand-Pull Inflation

Inflation resulting from increased consumer demand.

Business Cycle

Shows changes in economic activity over time.

Expansion

Phase of the business cycle where GDP increases and employment rises.

Peak

The highest point of economic activity in the business cycle.

Contraction

A phase in the business cycle where GDP decreases and unemployment rises.

Trough

The lowest point of economic activity in the business cycle.

Recession

A decline in economic activity lasting at least six months.

Consumer Confidence

Measures how optimistic consumers are about the economy.

Fiscal Policy

Government decisions about taxing and spending to stabilize the economy.

Expansionary Fiscal Policy

Involves increased government spending and lower taxes during recessions.

Contractionary Fiscal Policy

Involves decreased government spending and higher taxes to reduce inflation.

Deficit Spending

Occurs when the government spends more than it collects in taxes.

Crowding-Out Effect

When government borrowing increases interest rates, reducing business investment.

National Debt

The total amount the government owes.

Supply-Side Economics

Focuses on increasing production, often involving tax cuts.

Monetary Policy

Controlled by the Federal Reserve to regulate the money supply and credit.

Open-Market Operations

Buying or selling government securities as a tool of monetary policy.

Tight Money

Monetary policy that reduces inflation by limiting the money supply.

Easy Money

Monetary policy that stimulates economic growth by increasing the money supply.