Untitled Flashcards Set

Gross Domestic Product (GDP)

The market value of all final goods and services produced in a country for one year.

Gross National Product (GNP)

The market value of all final goods and services produced by members of one nation for one year.

Nominal GDP

GDP expressed in current market prices, not adjusted for inflation.

Real GDP

GDP expressed in constant market prices, adjusted for inflation.

Expenditure

The total amount spent by households, firms, government, and foreign residents on a country's products.

Components of GDP

Includes Consumption (C), Investment (I), Government spending (G), and Net exports (X - M).

Recession (NBER definition)

A period where output is declining; ends when the economy begins to grow again.

Fiscal Policy

Government policies on taxes, spending, and borrowing to stabilize the economy.

Multiplier Effect

The total change in output resulting from an initial change in aggregate demand.

Paradox of Thrift

The aggregate attempt to save more results in a fall in total income.

Fallacy of Composition

What is true for an individual may not be true for the whole economy.

Debt-to-GDP ratio

A measure of a government's indebtedness relative to the size of its economy.

Austerity Policy

Measures that reduce government spending and are believed to reinforce a recession.

Phillips Curve

Represents the trade-offs between inflation and unemployment in an economy.

Inflation targeting

Monetary policy that aims to keep inflation close to a specified target.

Primary Budget Deficit

The difference between government spending (G) and tax revenue (T).

Sovereign Debt Crisis

A situation where government bonds are considered risky due to default risk.

Marginal Propensity to Consume (MPC)

The fraction of additional income that is spent on consumption.

Expectations about Future Income

Future expectations can influence current consumption decisions.

Deflation

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

Fiscal Stimulus

Increased government spending intended to boost economic activity.

Supply and Demand

Economic model of price determination in a market.

Budget Deficit

A situation where government expenditures exceed revenues.

Crowding Out

When government borrowing leads to reduced private sector spending.

Monetary Policy

Central bank actions that shape money supply and interest rates.

Economic Growth

An increase in the capacity of an economy to produce goods and services.

Stagflation

A situation of stagnant economic growth, high unemployment, and high inflation.

Interest Rate

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

Liquidity

The ease with which an asset can be converted into cash.

Quantitative Easing

A monetary policy where a central bank purchases securities to increase the money supply.

Business Cycle

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

Opportunity Cost

The cost of forgoing the next best alternative when making a decision.

Aggregate Demand

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

Inflation

The rate at which the general level of prices for goods and services is rising.

Unemployment Rate

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

Balance of Payments

A record of all economic transactions between a country and the rest of the world.

Short-run Aggregate Supply (SRAS)

The total production of goods and services available in an economy at a given overall price level, in the short run.

Long-run Aggregate Supply (LRAS)

The total production of goods and services that an economy can achieve when utilizing its resources fully.

Consumer Price Index (CPI)

An index that measures the average change over time in prices paid by consumers for a market basket of goods and services.

Interest Rate Policy

Central bank policy decisions on the level of interest rates to influence economic activity.

Economic Indicator

A statistic about an economic activity that provides information about the economic performance of a country.