ECON 2120: Principles of Macroeconomics

These flashcards cover key vocabulary and concepts related to macroeconomics from the lecture notes.

Business Cycles

Fluctuations in the growth rate of real GDP around its trend growth rate.

Recession

A significant, widespread decline in real income (real GDP) and employment.

Civilian Unemployment Rate

The percentage of the civilian labor force that is unemployed.

Aggregate Demand (AD)

The total demand for goods and services within a certain time period in an economy.

Long-Run Aggregate Supply (LRAS)

A vertical line representing the level of output in an economy when resources are fully employed.

Short-Run Aggregate Supply (SRAS)

The total supply of goods and services that firms plan to sell during a specific time period.

Real Business Cycle (RBC) Model

A theory that argues business cycles are primarily caused by real shocks affecting the economy.

Positive Real Shock

An event that increases the potential growth rate of an economy.

Negative Real Shock

An event that decreases the potential growth rate of an economy.

Solow Growth Rate

An economy’s potential growth rate determined by increases in the stocks of labor, capital, and productivity.

Velocity of Money (V)

The rate at which money is exchanged in an economy, reflecting how often money is used to purchase goods and services.

Quantity Theory of Money

A theory that relates the money supply to the price level and economic output.

Inflation Rate (π)

The percentage increase in the price level over a period of time, indicating the erosion of purchasing power.

Aggregate Supply

The total supply of goods and services that firms are willing to sell at a given overall price level in a given time period.

Economic Shocks

Unexpected events that can have significant impacts on an economy's performance.

AD/AS Framework

A model that explains price levels and output through the interaction of aggregate demand and aggregate supply.

Spending Growth

The rate at which consumer and business spending is increasing in the economy.

Money Neutrality

The concept that changes in the money supply do not affect real economic variables in the long run.

Aggregate Demand Curve

A graphical representation showing the relationship between inflation and real output at various price levels.

Labor Productivity

The amount of goods and services produced by one hour of labor.

Inflation and Real GDP Growth

The relationship between changes in price levels and changes in the quantity of output produced in an economy.

Shocks to Aggregate Demand

Changes that shift the aggregate demand curve, affecting overall economic activity.

Central Bank

The institution responsible for managing a country's currency, money supply, and interest rates.

Economic Stability

A condition in which an economy experiences little fluctuation in productivity, prices, and employment.

Business Fluctuations

The cyclical variations in economic activity in an economy.

Demand Shock

An event that affects the demand side of the economy, resulting in changes in spending.