Macroeconomics 5904

Recession

temporary period of reduced economic activity; can be caused by either deflation or inflation

National Debt

the amount of money a government owes

Retaliatory Tariff

when Country A places a tariff on Country B's imports because Country B placed a tariff on Country A's imports

Purchasing Power

the ability to buy goods

Treasury Securities (Bonds)

purchasing government debt

Mixed Economy

a market economy with varying levels of government intervention

OPEC (Organization of the Petroleum Exporting Countries)

An international organization of countries that produce the majority of the world's oil supply the majority of member states located in the Middle East.

Gross National Product (GNP)

the productive output of the citizens of a particular country

North American Free Trade Agreement (NAFTA)

A trade agreement that created a free trade zone between the US, Canada, and Mexico

Price Ceiling

the maximum price that can be charged for a good as determined by a government or other entity responsible for economic regulation

Trade Deficit

buying more than they are selling

Executive Branch

The Presidency and other members of the Executive branch of Federal government; responsible for proposing and managing the Federal Budget

Market Economy

An economic system where decisions about production, consumption and investment are guided by the price of goods and services, which are determined by the laws of supply and demand.

Means of Production

The non-human resources used to produce goods in an economy

Price Control

a maximum or minimum limit on the price of a good instituted by the government

Internal Revenue Service (IRS)

The major tax-collecting body of the US government

Traditional Economy

An economy where goods are produced mainly for consumption by one's own family and traded or bartered in only the most basic ways

Communism

A political theory and economic system in which all property is publicly owned and each person works and is paid according to their abilities and needs.

Tax

A contribution to federal or state funds required for individuals or businesses

Inflation

the natural increase in prices over time.

The Federal Reserve (The Fed)

The central bank of the United States; responsible for setting interest rates, other monetary policy and regulating private banks and financial institutions

Deficit Spending

A budget situation where expenditure is greater than revenue

Comparative Advantage

The ability of an entity to produce a good or service at a lower opportunity cost than another entity.

Command Economy

government controls the economy, determining what should be produced and how much should be produced. This type of economy is most closely associated with communism.

Consumer Price Index (CPI)

A measure of the economy that uses consumer spending to determine the strength of an economy

Deflation

when the overall price of goods and services in an economy decreases

Tariff

a tax placed on a specific type of imported or exported good

Congress

The legislative branch of American government; provides budgetary funding and regulates tax law

Subsidies

Government payments to an industry to reduce costs or create false demand

Surplus Spending

A budget situation where expenditure is less than revenue

Institutions (of Economic Activity)

Formal organizations that help regulate and government economic activity

Globalization

The process by which economies and societies have become integrated

Balanced Budget

A budget situation where expenditure is equal to revenue

Unemployment Rate

The percentage of the labor force that is jobless and actively seeking work.

Monetary Policy

The Federal Reserve’s use of interest rates and the money supply to control inflation and support economic growth.

Fiscal Policy

Government use of spending and taxation to influence the economy.

Federal Reserve (The Fed)

The central bank of the U.S. that manages monetary policy.

Interest Rate

The cost of borrowing money, often controlled by the Federal Reserve.

Budget Deficit

When government spending exceeds revenue.

Budget Surplus

When government revenue exceeds spending.

Aggregate Demand

The total demand for goods and services within an economy.

Aggregate Supply

The total supply of goods and services that firms are willing and able to sell.

Trade Surplus

When exports exceed imports.

Trade Deficit

When imports exceed exports.

Business Cycle

The natural rise and fall of economic growth (expansion, peak, contraction, trough).

Consumer Price Index (CPI)

A measure used to track inflation by comparing prices of a basket of goods.

Exchange rate

The value of one currency in terms of another.

input costs

the price of resources or factors of production used in the production process to create goods or services

Protectionism

Policies aimed at protecting domestic industries from foreign competition (e.g., tariffs, quotas).