Basic Economics Review for Exam 3

These flashcards cover key vocabulary and concepts related to Basic Economics, focusing on the Business Cycle, Inflation, Unemployment, Aggregate Demand and Supply, and Fiscal Policies.

Business Cycle

The fluctuation in economic activity that an economy experiences over a period of time.

GDP

Gross Domestic Product, a measure of the economic output of a country.

CPI

Consumer Price Index, a measure that examines the weighted average of prices of a basket of consumer goods and services.

Inflation

The rate at which the general level of prices for goods and services rises, eroding purchasing power.

Disinflation

A decrease in the rate of inflation, meaning that prices are still rising but at a slower pace.

Hyperinflation

An extremely high and typically accelerating rate of inflation.

Aggregate Demand

The total demand for goods and services within an economy at a given overall price level and in a given time period.

Aggregate Supply

The total supply of goods and services that firms in an economy plan on selling during a specific time period.

Natural Rate of Unemployment

The long-term rate of unemployment around which the unemployment rate fluctuates.

Spending Multiplier

A factor by which an increase in autonomous spending will increase total spending in the economy.

Cost-Push Inflation

Inflation that occurs when production costs rise, leading to a decrease in aggregate supply.

Fiscal Policy

Government policy regarding taxation and spending to influence the economy.

Expansionary Fiscal Policy

A policy that seeks to stimulate economic growth usually through increased government spending and/or decreased taxes.

Contractionary Fiscal Policy

A policy aimed at decreasing aggregate demand through reduced government spending or increased taxes.

Supply-Side Fiscal Policies

Policies aimed at increasing economic growth by increasing aggregate supply.

Automatic Stabilizers

Government programs that automatically help stabilize the economy without additional legislative action.