LU5 Measuring the performance of the economy Chpter 13

Monetary Policy

The process by which a central bank manages money supply to achieve specific goals like controlling inflation and stabilizing currency.

Fiscal Policy

The use of government spending and taxation to influence the economy.

Economic Growth

An increase in the production of goods and services in an economy over a period of time.

Business Cycle

The fluctuations in economic activity characterized by periods of expansion and contraction.

Cyclical Unemployment

Unemployment that results from economic downturns or recessions.

Structural Unemployment

Unemployment resulting from industrial reorganization, typically due to technological change.

Seasonal Unemployment

Unemployment that occurs at certain times of the year when demand for labor is lower.

Opportunity Cost

The loss of potential gain from other alternatives when one alternative is chosen.

Market Equilibrium

The state in which supply and demand are balanced, resulting in stable prices.

Supply and Demand

The fundamental economic model of price determination in a market.

Price Elasticity of Demand

The measure of how much demand for a good responds to a change in price.

Disposable Income

The amount of money that households have available for spending and saving after taxes.

Capital Flight

The large-scale exit of financial assets from a country due to economic or political instability.

Trade Deficit

When a country's imports exceed its exports, resulting in a negative balance of trade.

Foreign Direct Investment (FDI)

Investment made by a company or individual in one country in business interests in another country.

Tariff

A tax imposed by a government on imported goods.

Quota

A limit on the amount of a specific good that can be imported into a country.

Subsidy

A financial assistance granted by a government to promote economic activity and support local businesses.

Natural Rate of Unemployment

The level of unemployment that exists when the economy is healthy and growing.

Human Capital

The skills, knowledge, and experience possessed by an individual that can affect their economic value.