Macroeconomics Review Flashcards

This set of flashcards covers key economic concepts relevant to macroeconomics, including definitions of important terms and economic principles.

Production Possibilities Frontier (PPF)

A curve that depicts all maximum output possibilities for two goods, given a set of resources.

Opportunity Cost

The loss of potential gain from other alternatives when one alternative is chosen.

Gross National Product (GNP)

The total market value of all final goods and services produced by the residents of a country in a given time period.

Aggregate Demand Curve

A curve that illustrates the total quantity of goods and services demanded across all levels of the economy at various price levels.

Expansionary Monetary Policy

A policy that increases the money supply and decreases interest rates to stimulate economic activity.

Stagflation

An economic condition characterized by slow economic growth and relatively high unemployment accompanied by inflation.

Structural Unemployment

Unemployment resulting from industrial reorganization, typically due to technological change.

Marginal Propensity to Save (MPS)

The fraction of additional income that is saved rather than spent.

Reserve Requirement

The minimum amount of reserves that must be held by a commercial bank.

Fiscal Policy

Government policy regarding taxation and spending to influence the economy.

Phillips Curve

A concept that illustrates an inverse relationship between inflation and unemployment.

Nominal Interest Rate

The interest rate before adjusted for inflation.

Real Interest Rate

The nominal interest rate minus the inflation rate.

Interest Rates

The cost of borrowing money or the return on savings, expressed as a percentage.

Consumer Expenditures

The total amount of money spent by households on goods and services.

Retained Earnings

The portion of net income not paid out as dividends but retained for reinvestment in the business.

Open Market Operations

The buying and selling of government securities by a central bank to control the money supply.

Demand Deposits

Bank account funds that can be accessed on demand, often through writing a check or debit card.

Supply Side Economists

Economists who believe that economic growth can be most effectively fostered by lowering taxes and decreasing regulation.

Aggregate Supply

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