EPF Unit Two Vocabulary: Institutions and Policies

Flashcards for vocabulary terms from EPF Unit Two: Institutions and Policies.

Business Cycle

The periodic fluctuations in economic activity over time, moving through phases of expansion, peak, contraction, and trough.

Expansion

A phase of the business cycle characterized by increasing economic activity, rising Gross Domestic Product (GDP), and growing employment.

Labor Market

The supply of and demand for labor, in which workers provide the supply of labor and employers provide the demand.

Contraction

A phase of the business cycle in which economic activity declines, marked by falling real GDP and reduced production.

Open Market Operation

The buying and selling of government securities by a central bank in order to control the money supply and influence interest rates.

Economic Indicators

Key statistical data points used by economists and analysts to evaluate the overall health, performance, and future trends of an economy.

Unemployment Rate

The percentage of the total labor force that is without a job and actively searching for work.

Purchasing Power

The financial ability to buy goods and services, or the value of a currency expressed in terms of the amount of goods or services one unit of money can buy.

Interest & Interest Rate

Interest is the fee paid for borrowing money, while the interest rate is the percentage of the principal amount charged by a lender per period.

Bond

A fixed-income instrument representing a loan made by an investor to a borrower, typically a corporation or government entity.

Gross Domestic Product

The total monetary or market value of all finished goods and services produced within a country's borders in a specific time period.

Export

A good or service produced in one country and sold to buyers in another country.

Import

A good or service brought into one country from another country for sale or trade.

Federal Reserve

The central banking system of the United States, responsible for conducting national monetary policy, supervising banking institutions, and maintaining financial stability.

Inflation

A general and sustained increase in the prices of goods and services in an economy over time, leading to a decline in purchasing power.

Consumer Price Index

A measure that tracks changes in the price level of a market basket of consumer goods and services purchased by households to evaluate inflation.

Discount Rate

The interest rate charged by the Federal Reserve to commercial banks and other depository institutions on short-term loans obtained from their regional Federal Reserve Bank.

Depression

A severe, long-lasting period of economic decline characterized by a dramatic fall in GDP, widespread business failures, and prolonged high unemployment.

Microeconomics

The branch of economics that focuses on the behavior, choices, and resource allocation of individual decision-making units, such as households and firms.

Law of Diminishing Returns

An economic principle stating that adding more of one factor of production, while keeping all other factors constant, will eventually yield smaller incremental gains in output.

Fiscal Policy

The use of government spending and taxation policies to influence overall economic conditions, such as demand, employment, and inflation.

Monetary Policy

The set of actions taken by a central bank to control the nation's money supply, credit availability, and interest rates to achieve sustainable economic growth.

Macroeconomics

The branch of economics that studies the structure, performance, behavior, and decision-making of an entire economy as a whole.

Reserve Requirement

The minimum percentage of customer deposits that a commercial bank must hold in cash or on deposit with the central bank rather than lending out.

Gross National Product (GNP)

The total market value of all final goods and services produced by a country's residents and businesses, regardless of whether the production occurs domestically or abroad.

Federal Funds Rate

The target interest rate set by the Federal Reserve at which commercial banks lend reserve balances to other commercial banks overnight.

Recession

A significant and widespread decline in economic activity lasting more than a few months, typically identified by a fall in real GDP for two consecutive quarters.