Macroeconomics: Events and Ideas

These flashcards cover key concepts in macroeconomics, including definitions and theories introduced in the lecture.

Classical Macroeconomics

A theory where the short run is seen as unimportant, prices are flexible, and aggregate supply is vertical.

Keynesian Economics

An economic theory that emphasizes the short-run effects of aggregate demand on output and the importance of government intervention.

Animal Spirits

A term coined by Keynes to describe the instincts, proclivities, and emotions that influence and guide human behavior in economic decision-making.

Natural Rate Hypothesis

A theory suggesting that there is a specific level of unemployment that the economy naturally gravitates towards in the long run.

Liquidity Trap

A situation in which the demand for money is so high that interest rates are close to zero and monetary policy becomes ineffective.

Political Business Cycle

The theory that political leaders manipulate fiscal and monetary policy to influence the economy's performance ahead of elections.

Expansionary Fiscal Policy

A form of fiscal policy that involves increasing government spending and/or decreasing taxes to stimulate economic growth.

Monetarism

An economic theory that emphasizes the role of governments in controlling the amount of money in circulation and reviews relationship with economic cycles.

Secular Stagnation

An economic condition characterized by negligible or no economic growth in a market-based economy.

Short-run Aggregate Supply (SRAS)

The aggregate supply curve that is upward sloping, indicating that increases in aggregate demand can raise both prices and output in the short run.