AP Macroeconomics Unit 2 Vocab

Aggregate Demand

The amount of goods and services in the economy that will be purchased at all possible price levels.

Aggregate Supply

The total amount of goods and services in the economy available at all possible price levels.

Business Cycle

Alternating periods of economic expansion and recession.

Consumer Price Index (CPI)

Monthly statistics that measure the pace of inflation or deflation--current value of the market basket divided by the value of the market basket in the base year times 100.

Cyclical Unemployment

Rises during economic downturns and falls when the economy improves.

Discount Rate

The minimum interest rate charged by the Federal Reserve when it lends to other banks.

Federal Reserve System

The U.S.'s central bank that regulates the money supply and interest rates.

Fiat Money

Official money used by a government.

Fiscal Policy

Legislation that changes the levels of taxation and/or government spending to stabilize the economy.

Frictional Unemployment

Occurs when people take time to find a job.

Full Employment

The condition in which virtually all who are able and willing to work are employed. The unemployment rate is between 4% and 6%.

Gross Domestic Product (GDP)

A measurement of the total goods and services produced within a country.

Inflation

An increase in prices and a fall in the purchasing value of money.

Interest on Reserves

The central bank's policy of paying banks an interest rate for the deposits that they hold as reserves.

Macroeconomics

The study of the economy as a whole, including inflation, unemployment, and economic growth.

Market Basket

A representative collection of goods and services.

Medium of Exchange

Any item sellers generally accept and buyers generally use to pay for a good or service.

Monetary Policy

Federal Reserve's actions to achieve maximum employment, price stability, and moderate long-term interest rates.

National Debt

The amount of money a national government owes.

Open Market Operations

Buying and selling government securities to change the supply of money.

Output Expenditure Model

Value of a country's exports minus value of a country's imports in a given time.

Price Stability

No sudden increase or decrease in the overall price of goods.

Real GDP

GDP adjusted for inflation-value of output expenditure model divided by CPI (or another price index number) times 100.

Reserve Requirement

The percentage of deposits that banking institutions must hold in reserve.

Seasonal Unemployment

Occurs as a result of harvest schedules or vacations, or when industries slow or shut down for a season.

Steady Economic Growth

An economy with stable or mildly fluctuating size.

Store of Value

The belief that money saved today will hold its purchasing value in the future.

Structural Unemployment

Occurs when workers' skills do not match the jobs that are available.

Unemployment Rate

Number of unemployed people in a country divided by number of people in the labor force times 100.

Unit of Account

Acts as a common standard for comparing the values of goods and services—the dollar in the U.S.