econ paper 2

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Unemployment

people of working age who are actively looking for a job and able to work, but who are not employed

Inflation

sustained increase in average price levels in the economy

Deflation

a persistent fall in average price levels in the economy

Demand-Pull inflation

increase in AD

Cost-Push inflation

Increase in costs of FoP (SRAS decreases)

economic growth

an increase in real GDP over time

absolute poverty

the percentage of the population whose income falls below the poverty line

relative poverty

living standards or incomes well below ‘average’ or median in society

AD

the total spending on all goods and services in an economy at a given price level over a period of time.

AS

the total amount of all goods and services produced in an economy at a given price level over a period of time.

rGDP

Nominal GDP is GDP not adjusted for inflation (measured with prevailing prices at time of measurement). Real GDP is adjust for inflation.

demand-side policies

focus on changing aggregate demand.  Demand-side policies are based in the idea that short-term fluctuations in rGDP in the business cycle are due to changes in AD.

fiscal policy

the government’s use of expenditures and taxation to influence the level of aggregate demand

monetary policy

the central banks use of the supply of money and interest rates to have an effect on aggregate demand in the economy

interest rates

the ‘price’ of money services (borrowing/saving)