Macroeconomics Vocabulary

Flashcards for Macroeconomics vocabulary.

Macroeconomics

The study of the economy as a whole, including topics such as inflation, unemployment, and economic growth.

Economic Dilemma (Scarcity)

A situation where limited resources force choices to be made.

Cost-Benefit Analysis

A systematic approach to making decisions by weighing the costs and benefits of different options.

Opportunity Cost

The value of the next best alternative that is forgone when making a decision.

Marginal Thinking

Evaluating the incremental impact of a decision, or the additional cost or benefit of one more unit.

Incentives

Factors that motivate and influence behavior, whether positive or negative.

Supply/Demand

The relationship between the quantity of a good or service that producers are willing to offer and the quantity that consumers are willing to buy.

Economic goals for capitalism

The goals a country has for its economy, like economic freedom, efficiency, equity, security, full employment, price stability, and economic growth.

Business Cycle

A recurring pattern of economic expansion and contraction.

Peak

The highest point of economic expansion in the business cycle.

Trough (Depression)

The lowest point of economic contraction in the business cycle.

Recession

A significant decline in economic activity spread across the economy, lasting more than a few months.

Expansion

A period of economic growth as measured by a rise in real GDP.

Gross Domestic Product (GDP)

Total value of all goods and services produced within a country’s borders in a specific time period.

Real GDP

GDP adjusted for inflation to reflect the value of goods and services.

Nominal GDP

GDP not adjusted for inflation, measured in current prices.

GDP = C + G + I + X

GDP = Consumption + Government Spending + Investment + Net Exports (Exports - Imports).

Inflation

A general increase in prices and fall in the purchasing value of money.

Deflation

A general decrease in the price level.

Hyperinflation

A rapid and out-of-control increase in prices.

Demand-pull inflation

Inflation caused by an increase in aggregate demand.

Cost-push inflation

Inflation caused by an increase in the costs of production.

Wage Price Spiral

A feedback loop in which rising wages cause rising prices, and rising prices cause rising wages.

Gov Deficits

When a government spends more money than it receives in revenue.

Monetary Policy

Actions taken by a central bank to manipulate the money supply and credit conditions to stimulate or restrain economic activity.

CPI (Consumer Price Index)

A measure of the average change over time in the prices paid by urban consumers for a basket of consumer goods and services.

Stagflation

A condition of slow economic growth and relatively high unemployment - a stagnant economy - at the same time as rising prices (inflation).

Unemployment

The percentage of the labor force that is unemployed

Labor force

The total number of people who are employed and unemployed.

Full employment

The level of employment rates wherein there is no cyclical or deficient-demand unemployment.

Underemployed

Workers who are employed in a job that is below their skill level or who are working part-time but desire full-time work.

Discouraged workers

Individuals who are available and willing to work but are not actively seeking employment.

Frictional Unemployment

Unemployment that results from people who are temporarily between jobs.

Seasonal Unemployment

Unemployment that results from the seasonal nature of some jobs.

Cyclical Unemployment

Unemployment that results from a downturn in the business cycle.

Structural Unemployment

Unemployment that results from a fundamental change in the structure of the economy.

Contractionary Policy

Government policy that attempts to reduce economic growth.

Expansionary Policy

Government policy that attempts to increase economic growth.

Multiplier effect

The effect that an increase in spending produces a more than proportionate increase in national income and consumption.

Taxing: equity

Fairness of a tax system.

Taxing: simplicity

Ease of understanding and administering a tax system.

Taxing: efficiency

Tax minimizes the cost of compliance and economic distortion.

Benefit-received tax

Tax should be paid by those who benefit from the service or program it funds.

Ability to pay tax

Tax should be paid based on the ability of the taxpayer to shoulder the burden

Taxable Income

Income that is subject to taxation.

Proportional tax

Tax in which the average tax rate is the same at all income levels.

Progressive tax

Tax in which the average tax rate increases as income increases.

Regressive tax

Tax in which the average tax rate decreases as income increases.

Spending

Money spent by the government on goods, services, and transfer payments.

Deficit

When a government spends more money than it collects in revenue.

Debt

Accumulated deficits over time.

Mandatory spending

Government spending that is required by law.

Discretionary spending

Government spending that is not required by law.

Supply Side Economics

Economic theory that focuses on increasing aggregate supply to stimulate the economy.

Demand Side Economics

Economic theory that focuses on increasing aggregate demand to stimulate the economy.

Public goods/services

Goods that are non-excludable and non-rivalrous, usually provided by the government.

Consumer protection/regulation

Government actions to protect consumers from unsafe products and unfair business practices.

Monetary Policy

Managing the economy by altering the money supply and interest rates

Contractionary Policy

The actions of central banks to lower the economys money supply.

Expansionary Policy

The actions of central banks to increase the economys money supply.

Open Market Operations

The buying and selling of government securities in the open market in order to expand or contract the amount of money in the banking system.

Discount Rate

The interest rate at which commercial banks can borrow money directly from the Fed.

Federal Funds Rate

The target rate that the Fed wants banks to charge one another for the overnight lending of reserves.

Reserve Ratio

The fraction of deposits banks are required to keep in their account at the Federal Reserve.

Allocation of Scarce Resources

The allocation of scarce resources in societies through analysis of individual choice, market interaction, and public policy.

Nature of Economic Knowledge

The nature of economic knowledge as a process of inquiry that examines and analyzes how economics is viewed, constructed, and interpreted.

Economic Patterns of Continuity and Change

Analyzing economic patterns of continuity and change, through multiple perspectives, within and among cultures and societies.

Market Failures

Government intervention in markets to correct inefficiencies or inequities.

Stabilizing the Economy

Policies used by the government to moderate the fluctuations of the business cycle.

Measure the Aggregate Output of the Economy

Using GDP to determine the aggregate output of an economy.

Fiscal Policy

Using fiscal policy to regulate the economy.

Monetary Policy

Using monetary policy to regulate the economy.

Sources of Economic Growth

Sources of economic growth and how they help improvements in productivity.

Government Role in Regulation

The role of the government in investing regulation and consumer protection.