macro chap 1

Macroeconomics

The study of the structure and performance of national economies and the policies that governments use to try to affect economic performance.

Gross Domestic Product (GDP)

A measure of the value of final goods and services produced within a country's borders during a specific time period.

Business Cycle

Short-run contractions and expansions in economic output characterized by phases called recession and boom.

Recession

The downward phase of the business cycle, marked by a decline in economic activity.

Unemployment

The state of being without a job despite actively seeking work; often increases during recessions.

Inflation

A general increase in prices of goods and services in an economy over time.

Deflation

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

Trade Surplus

A situation where a country's exports exceed its imports.

Trade Deficit

A situation where a country's imports exceed its exports.

Fiscal Policy

Government policy regarding spending and taxation to influence the economy.

Monetary Policy

Strategies by a central bank to control the money supply and interest rates to achieve economic objectives.

Classical Economics

Economic theory that emphasizes free markets, the idea that supply creates its own demand, and minimal government intervention.

Keynesian Economics

Economic theory that advocates for government intervention to manage demand and address unemployment.

Monetarism

Economic theory that focuses on the role of governments in control of the amount of money in circulation.

New Classical Economics

A school of thought that believes markets clear continuously and that economic agents use all available information to predict future economic states.

New Keynesian Economics

An approach that incorporates microeconomic foundations to explain price stickiness and market imperfections.

Dynamic Stochastic General Equilibrium (DSGE) Models

Models that analyze macroeconomic phenomena through the interaction of representative agents in different markets, emphasizing dynamics and stochastic shocks.

Adaptive Expectations

The theory that people form expectations based on past experiences and adjust them slowly over time.

Real Business Cycle Theory

Theory that business cycles are a response to real (non-monetary) shocks affecting the economy.

Natural Rate of Unemployment

The level of unemployment consistent with a stable rate of inflation, influenced by various economic factors.