Introduction to Economics B

These flashcards cover key concepts and terminology from the Introduction to Economics B course, focusing on economic indicators and models.

GDP Deflator

A measure of the price level calculated as the ratio of nominal GDP to real GDP times 100.

Nominal GDP

The total monetary value of all finished goods and services produced within a country's borders in a specific time period without adjusting for inflation.

Real GDP

The total monetary value of all finished goods and services produced within a country in a specific time period, adjusted for inflation.

GDP per Capita

GDP divided by total population, indicating the average economic output per person.

Aggregate Production Function

An equation that describes the relationship between inputs (capital and labor) and the output of goods and services.

National Saving (S)

The total income in an economy after paying for consumption and government purchases.

Unemployment Rate (U/L)

The percentage of the labor force that is unemployed.

Fisher Effect

A theory that states the nominal interest rate moves one-for-one with the inflation rate.

Money Multiplier

The amount of money that banks generate with each dollar of reserves.

Velocity of Money (V)

The speed at which money circulates in the economy, calculated as (P x Y)/M.

Real Exchange Rate (ε)

The rate at which a person can trade the goods and services of one country for those of another country.

IS Curve

A curve that shows the relationship between interest rates and the level of income that brings goods markets into equilibrium.

LM Curve

A curve that represents the relationship between the quantity of money in the economy and the interest rates.

Aggregate Demand

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

Aggregate Supply

The total supply of goods and services that firms in an economy plan to sell during a specific time period.

Contraction in Aggregate Demand

A decrease in the total demand for goods and services in an economy, leading to lower output levels.

Expansionary Fiscal Policy

Government policy aimed at increasing economic activity through increased spending and/or tax cuts.

Long-Run Aggregate Supply

The level of output that an economy can sustain over the long term without inflation.

Short-Run Aggregate Supply (SRAS)

The total production of goods and services available in an economy at different price levels in the short term.