econ ★ economic indicators

4 main jobs of the Federal Reserve

set monetary policy, regulate banks, payment services, and financial stability

 ways the Federal Reserve can “heat up” the economy

lowering interest rates, lowering the reserve requirement, and open market asset purchases

 ways the Federal Reserve can “cool down” the economy

raising interest rates, raising the reserve requirement, and open market asset sales

monetary policy purpose

manage economic fluctuations ensuring low unemployment and minimal inflation

ways the fiscal policy can “cool down” the economy

higher taxes and decreased government spending

ways the fiscal policy can “heat up” the economy

lower taxes and increased government spending

deficit

is the yearly difference between revenue for the government and yearly expenses of the government, which is added every year to the running debt

inflation

when the buying power of money goes down and prices go up

hyperinflation

where inflation is very high and usually accelerating

outcome of high inflation

everyone loses buying power, the cost of borrowing increases, and savers are negatively impacted with inflation

demand pull theory

prices are pulled up because the demand is greater than supply

cost-push theory

prices are pushed up because the cos of resources and labor increases

cyclical unemployment

anytime there is a direct link between a downturn in the economy and an increase in unemployment

frictional unemployment

when people change jobs or are looking for their job

seasonal unemployment

caused by seasonal issues

structural unemployment

when people become unemployed because they lack education or certain skills

who is apart of the labor force

at least 16 years old, has a job, and is actively looking for a job

not a part of the labor force

retired or disabled, not looking for a job, given up looking for work, not working

gross domestic product

the value of all final goods and services produced by a country

consumer price index

value of a market basket of goods and services