Introduction to Macroeconomics: History, Policy, and Employment

Flashcards defining core concepts, historical milestones, and policy frameworks from the introductory macroeconomics lecture.

Microeconomics

The branch of economics focusing on small-scale decisions, such as individual choices regarding money and time, supply and demand, and the pricing of specific goods.

Macroeconomics

The branch of economics addressing the overall big picture of the economy, assessing economic health using data and evaluating policy interventions.

Production Possibility Frontier (PPF)

An economic model showing the trade-off of potential outputs when a country utilizes all its resources to their best capacity, famously illustrated using defense goods (guns) and consumer goods (butter).

Classical Economics

The economic school of thought advising government to "do nothing" during downturns, premised on the belief that markets are self-regulating and naturally eliminate surpluses and shortages through price adjustments.

Sticky Prices

The concept advanced by John Maynard Keynes describing how prices fail to adjust downward or upward quickly as classical theory predicts, causing economic downturns to become prolonged.

John Maynard Keynes

The British economist considered the father of modern macroeconomics who argued that if the private market fails to provide sufficient jobs, the public sector (government) must intervene to provide them.

The New Deal

President Franklin D. Roosevelt's economic program characterized by the philosophy to "do something," creating a revolutionary role for government in establishing jobs programs to address the Great Depression.

Civilian Conservation Corps (CCC)

A 1930s New Deal jobs program that provided housing, food, and employment to workers, responsible for projects such as the park at Kennesaw Mountain and the Appalachian Trail.

Tennessee Valley Authority (TVA)

A 1930s federal program established as a jobs program to construct dams creating lakes across Georgia, Tennessee, and surrounding regions.

Hard Times

A book by Studs Terkel compiled from personal interviews chronicling the direct human experiences and hardships during the Great Depression.

Full Employment Act of 1946

Legislation enacted in 1946 making it the legal responsibility of the United States government to ensure the economy maintains full employment and to limit economic busts.

Full Employment

An economic condition defined in macroeconomics as any unemployment rate below $5\%$, acknowledging that an unemployment rate of $0\%$ is impossible due to regular labor force transitions.

Monetary Policy

Economic stabilization policy controlled by the Federal Reserve, which manipulates the money supply and interest rates to balance full employment and low inflation.

Federal Reserve

The non-elected governing body that meets every six weeks to manage U.S. monetary policy, interest rates, and the money supply, operating independently from elected officials.

Fiscal Policy

Economic policy conducted by elected officials (the President and Congress) using the tools of taxation and government spending to influence economic activity and employment.

Great Recession

The severe economic downturn beginning in 2008 caused by a collapse in the housing market and banking crisis, leading to federal bank bailouts and a massive 2009 infrastructure spending bill.

Microeconomics

The branch of economics focusing on small-scale decisions, such as individual choices regarding money and time, supply and demand, and the pricing of specific goods.

Macroeconomics

The branch of economics addressing the overall big picture of the economy, assessing economic health using data and evaluating policy interventions.

Production Possibility Frontier (PPF)

An economic model showing the trade-off of potential outputs when a country utilizes all its resources to their best capacity, famously illustrated using defense goods (guns) and consumer goods (butter).

Classical Economics

The economic school of thought advising government to 'do nothing' during downturns, premised on the belief that markets are self-regulating and naturally eliminate surpluses and shortages through price adjustments.

Sticky Prices

The concept advanced by John Maynard Keynes describing how prices fail to adjust downward or upward quickly as classical theory predicts, causing economic downturns to become prolonged.

John Maynard Keynes

The British economist considered the father of modern macroeconomics who argued that if the private market fails to provide sufficient jobs, the public sector (government) must intervene to provide them.

The New Deal

President Franklin D. Roosevelt's economic program characterized by the philosophy to 'do something,' creating a revolutionary role for government in establishing jobs programs to address the Great Depression.

Civilian Conservation Corps (CCC)

A 1930s New Deal jobs program that provided housing, food, and employment to workers, responsible for projects such as the park at Kennesaw Mountain and the Appalachian Trail.

Tennessee Valley Authority (TVA)

A 1930s federal program established as a jobs program to construct dams creating lakes across Georgia, Tennessee, and surrounding regions.

Hard Times

A book by Studs Terkel compiled from personal interviews chronicling the direct human experiences and hardships during the Great Depression.

Full Employment Act of 1946

Legislation making it the legal responsibility of the United States government to ensure the economy maintains maximum employment and to limit economic busts.

Full Employment

The macroeconomic threshold defined as any unemployment rate below $5\%$, acknowledging that a rate of $0\%$ is unattainable due to regular labor force transitions.

Monetary Policy

Economic stabilization policy controlled by the Federal Reserve, which manipulates the money supply and interest rates to balance full employment and low inflation.

Federal Reserve

The non-elected governing body that meets every six weeks to manage U.S. interest rates and the money supply, operating independently from elected officials.

Fiscal Policy

Economic policy conducted by elected officials (the President and Congress) using the tools of taxation and government spending to influence economic activity and employment.

Great Recession

The severe economic downturn beginning in 2008 caused by a collapse in the housing market and banking crisis, leading to federal bank bailouts and a massive 2009 infrastructure spending bill.

Gross Domestic Product (GDP)

The total dollar value of all final goods and services produced within a nation during a single year and sold at retail prices.

Nominal GDP

A measure of economic output calculated by multiplying current-year quantities by current-year prices ($Q_{\text{CY}} \times P_{\text{CY}}$), without adjusting for inflation.

Simon Kuznets

The economist who developed the official metric for Gross Domestic Product in 1931 and was later awarded the Nobel Prize for his work in national income accounting.

Underground Economy

Unreported economic activity conducted to evade taxation, encompassing both illegal trade and unrecorded legal cash transactions such as cash tips.

U.S. Underground Economy Rate

An estimated $10\%$ of reported national output, constituting the lowest proportion of any major nation while representing the largest total dollar volume worldwide.

Rule of 72

A mathematical shortcut used to calculate the approximate number of years needed for an economy to double in size by dividing $72$ by the annual percentage growth rate.

Peak Great Depression Unemployment

The highest recorded jobless rate in United States history, reaching $25\%$ in 1931 accompanied by a $30\%$ drop in total national production.

Lowest Recorded U.S. Unemployment

The historic record-low unemployment rate of $1\%$ achieved in 1945 during peak domestic industrial mobilization for World War II.

Dual Mandate

The statutory responsibility of the Federal Reserve to conduct monetary policy targeting both maximum sustainable employment and price stability (low inflation).

Final Goods

End-use consumer products sold at retail prices, which are counted in national output measures to avoid double counting intermediate production stages.

California Economic Ranking

The state producing over $4\text{ trillion dollars}$ in output, making it the largest state economy in the United States and the equivalent of the sixth-largest economy globally.

Creation of the Unemployment Rate Metric

The government statistical measure created in 1938 by federal economists during the Great Depression to systematically track active labor market job seekers.

Unit of Measurement Problem in Output Aggregation

The practical obstacle of adding physically disparate goods directly together, resolved by converting physical quantities into dollar values using market prices to create a common metric.

Pricing Standard in Output Valuation

Retail prices, which measure the actual price paid by the final consumer rather than wholesale or intermediate production costs.

Money GDP

An alternative designation for nominal or current-dollar economic output, calculated by multiplying current-period quantities by the prices of that exact same period ($Q_{\text{CY}} \times P_{\text{CY}}$).

Calculation of an Item's Total Dollar Value in GDP

The mathematical product of the quantity produced during the year and its prevailing unit retail price ($Q \times P$).

Measurement of Services in National Accounts

Valuing non-physical economic activities—such as education or medical care—by the gross fees, wages, or institutional compensation paid for that labor.

Primary Data Source for Output Accounting

Federal income tax filings and reported corporate revenues, which provide government statisticians with the verified transactional records needed to tally legal national production.