Chapter 23: An Introduction to Macroeconomics

Business cycle

Long-run economic growth and the short-run fluctuations in output and employment

Recession

Output + living standards decline

Real gross domestic product

Measures the value of final goods and services produced within the borders of a given country during a given period of time, typically a year

Nominal GDP

The dollar value of all goods and services produced within the borders of a given country using their current prices during the year that they were produced

Unemployment

The state a person is in if he or she cannot get a job despite being willing to work and actively seeking work

household savings

Banks collect ________ + lend funds to businesses.

Inflation

Increase in overall level of prices

Modern economic growth

Output per person rises as compared with earlier times in which output (but not output per person) increased

demand shock

Economy behaves differently based on how much time has passed after ________.

Savings

Generated when current consumption is less than current output

Investment

When resources are devoted to increasing future output

Economic investment

Creation + expansion of business enterprises

Financial investment

Purchase of assets in the hope of reaping financial gain

Shocks

Situations in which firms were expecting one thing to happen but then something else happened

Demand shocks

Unexpected changes in demand for goods + services

Business cycle

Long-run economic growth and the short-run fluctuations in output and employment

Recession

Output + living standards decline

Real gross domestic product

Measures the value of final goods and services produced within the borders of a given country during a given period of time, typically a year

Nominal GDP

The dollar value of all goods and services produced within the borders of a given country using their current prices during the year that they were produced

Unemployment

The state a person is in if he or she cannot get a job despite being willing to work and actively seeking work

Inflation

Increase in overall level of prices

Modern economic growth

Output per person rises as compared with earlier times in which output (but not output per person) increased

Savings

Generated when current consumption is less than current output

Investment

When resources are devoted to increasing future output

Financial investment

Purchase of assets in the hope of reaping financial gain

Economic investment

Creation + expansion of business enterprises

Shocks

situations in which firms were expecting one thing to happen but then something else happened

Demand shocks

Unexpected changes in demand for goods + services

Supply shocks

Unexpected changes in supply of goods + services

Inventory

Store of output that has been produced but not yet sold

Inflexible (sticky) prices

Prices that cannot change rapidly in response to changes in demand

Flexible prices

React within seconds to changes in supply + demand

Supply shocks

Unexpected changes in supply of goods + services

Inventory

Store of output that has been produced but not yet sold

Inflexible prices

Prices that cannot change rapidly in response to changes in demand

Flexible prices

React within seconds to changes in supply + demand