Economics | Macroeconomics Review

What is the value of all final goods & services produced within a given period?

Gross Domestic Product (GDP)

What does GDP measure?

A nation’s economic growth from one period to the next (aka economic well-being)

What makes GDP?

Consumption, investment, government expenditures, and net exports.

What part of GDP describes the goods and services a consumer can buy?

Consumption

What part of GDP describes fixed assets for production like new homes and company inventory?

Investments

What part of the GDP includes roads, police, schools, education, employee salaries, etc?

Government Expenditures

What part of the GDP describes the value of a country’s exports to other nations minus its imports from other nations?

Net exports

Intermediate goods, used goods, household production, underground production (ex: Black Market), financial transactions, and transfer payments are examples of what?

Goods and services that aren’t included in the GDP

What is GDP, but adjusted for inflation?

Real GDP

What GDP type indicates individual citizen contribution towards the GDP?

GDP per capita

What is the GDP per capita equation?

What GDP type estimates the value of the total worth of production and services by, citizens of a country, on its land or foreign land

Gross National Product

Income distribution, non-monetary output or transactions (bartering), no desirable externalities, social well-being, and measures of standard of living are examples of what?

Limitations of GDP

What GDP alternative measures a country’s overall development based on life expectancy, education, and per capita income?

Human Development Index (HDI)

What GDP alternative is adjusted to include income distribution, environmental costs & social well-being?

Genuine Progress Indicator (GPI)

What GDP alternative measures how efficiently countries produce long, happy, lives by examining life expectancy, well-being, and inequality?

Happy Planet Index (HPI)

What cycle shows the recurring swings in real GDP?

Business Cycle

What part of the business cycle is at the height of economic expansion, where there’s low unemployment, high inflation, and real GDP is at temporary high?

Peak

What part of the business cycle has real GDP decreasing?

Contraction

What part of the business cycle is at a low point, where there’s high unemployment and low inflation, all before real GDP begins to increase?

Trough

What part of the business cycle has the real GDP increasing, which leads to a correlation to the economy is recovering?

Expansion

How is the business cycle measured?

Measured from peak to peak

What term describes when a person is actively searching for employment, but is unable to find work?

Unemployment

What is the term to describe the estimate of an economy’s active workforce?

Labor force

Retirees, students, stay-at-home parents, disabled individuals, discouraged workers, and individuals who are engaged in unpaid work are examples of what?

People who aren’t in the workforce

What is the equation to calculate unemployment?

What type of unemployment is short-term and occurs when a worker transitions jobs?

Frictional unemployment

What type of unemployment is longer-lasting, and occurs when fundamental shifts in the economy happen?

Structural unemployment

What type of unemployment is overall, that is caused by cycles of economic upturn and downturn?

Cyclical employment

What type of unemployment happens when employment doesn’t need a worker until another season?

Seasonal employment

What term describes when all available labor resources are being used in the most efficient way possible?

Full employment

What term describes an increase in the general level of prices?

Inflation

What causes demand pull inflation?

When there’s too much demand chasing too few goods

What causes supply push inflation?

When there’s a disruption in production, or when there’s a change in the cost of inputs

What causes monetary inflation?

When the government prints more money to pay off debt

Dramatic increases in price for a short period of time is what type of inflation?

Hyperinflation

When general prices of goods & services decrease for a significant amount of time is what type of inflation?

Deflation

What index measures the monthly change in prices paid by U.S. consumers?

Consumer price index (CPI)

Market basket equation

CPI equation

Inflation rate equation

What curve shows the quantity of goods & services that producers are willing & able to supply at different price levels?

Aggerate supply

What curve shows the quantity of goods & services that buyers are willing and able to buy at different price levels?

Aggregate demand

Demand-side inflation curve

Demand-side deflation curve

Supply-side inflation curve

Supply-side deflation curve

Good & service inflation equation

What is a voluntary exchange of goods ad services between economic actors such as consumers, companies, & nations?

Trade

What is the spread of products, jobs, and info across national borders and culture?

Globalization

Exports

Where a nation’s products are shipped to other nations

Imports

Where a nation buys products from other countries

What is the ability where one can produce more than another using the same inputs?

Absolute advantage

What is the ability where one can produce more than another in a more efficient and economically competitive matter?

Comparative advantage

What is the term that describes when one focuses on the production of a limited scope of goods so they can trade with other goods?

Specialization

What type of policy doesn’t restrict imports or exports between countries which allows goods & services to flow smoothly across boarders?

Free trade

What type of pact is made between two countries to reduce barriers to imports and exports among them?

Trade agreements

What type of policy(ies) restricts international trade?

Protectionism

What is a tax imposed by a country on international goods and services that is passed down to its citizens to domestically influence said goods & services?

Tariff

What is the taxing and spending plan of the national government?

Federal budget

What happens to the federal budget when government spending is greater than its income & taxes?

Budget deficit

What happens to the federal budget when government spending is less than its revenues?

Budget surplus

What type of government spending is required by existing law?

Mandatory spending

What type of government spending is spending that congress can adjust?

Discretionary spending

What type of government spending are payments that pay off national debt?

Net interest

What controls the money supply, and is referred to as the “bank of banks?”

The Federal Reserve

What group coordinates the Federal Reserve?

Board of governors

How does the Fed interact with banks?

Fed supervises & regulates the banks in the economy

What are actions taken by the Fed to regulate the nation’s supply of money & credit?

Monetary Policy

What policy fosters stable prices, economic growth, and high employment?

Monetary Policy

What policy speeds up the economy, or in other words, increases economic growth?

Expansionary Policy

What policy slows up the economy, or in other words, decreases economic growth?

Contractionary policy

What happens when the Fed buys bonds?

Money supply increases

What happens when the Fed sells bonds?

Money supply decreases

What happens when the Fed lowers the interest rate?

Banks decrease the interest rate

What happens when the Fed raises the interest rate?

Banks increase the interest rate

What happens when the Fed lowers the Reserve Requirements?

Increases the amount loaned

What happens when the Fed raises the Reserve Requirement

Decreases the amount loaned