The Policy and Practice of Macroeconomics

These flashcards cover key vocabulary and concepts in macroeconomics, including definitions and important terms related to economic theory, models, and policies.

Economic Model

A simplified representation of economic phenomena that takes a mathematical or graphical form.

Endogenous Variables

Variables that are explained by a model.

Exogenous Variables

Variables that explain the behavior of endogenous variables.

Real GDP

Measures the output of actual goods and services produced in an economy over a fixed period, usually a year.

Business Cycle

Recurrent up and down movements in economic activity that differ in their regularity.

Recession

A period when economic activity declines and real GDP per person falls.

Depression

A severe decline in real GDP.

Unemployment Rate

The percentage of workers who are looking for work but do not have jobs at a specific point in time.

Inflation

The rate at which the overall level of prices is rising.

Deflation

Occurs when the inflation rate is negative.

Hyperinflation

A situation of super high inflation.

Fiscal Policy

Government policy regarding taxation and spending.

Monetary Policy

Management of the money supply and interest rates conducted by central banks.

Stabilization Policy

Macroeconomic policy that aims at minimizing business cycle fluctuations and stabilizing economic activity.

Activists

Advocates for the use of policies to eliminate excessive unemployment.

Nonactivists

Those who argue against the use of stabilization policies due to the economy's self-correcting mechanisms.

Government Budget Deficit

The excess of government spending over tax revenues for a particular year.