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Macroeconomics

A branch of economics that analyzes the economy as a whole, including topics such as inflation, unemployment, and economic growth.

Economic Cycle

The fluctuations in economic activity that an economy experiences over a period of time, characterized by periods of expansion and contraction.

Gross Domestic Product (GDP)

The market value of all final goods and services produced within an economy in a given time period.

Stock vs Flow

Stock represents a quantity at a specific point in time (like wealth), while flow refers to a quantity measured over time (like income).

Final Goods vs Intermediate Goods

Final goods are products that are purchased for consumption, while intermediate goods are used to produce final goods and are not counted separately in GDP.

Depreciation

The reduction in the value of an asset over time due to wear and tear.

Net Exports (NX)

The value of a country's exports minus the value of its imports.

Aggregate Demand (AD)

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

Marginal Propensity to Consume (MPC)

The proportion of any additional income that a consumer will spend on consumption as opposed to saving.

Expansionary Fiscal Policies

Government policies aimed at increasing economic activity, typically through increased public spending or tax cuts.

Contractionary Fiscal Policies

Government policies aimed at decreasing economic activity, typically through reduced public spending or increased taxes.

The Laffer Curve

A representation of the relationship between tax rates and tax revenue, showing that there is an optimal tax rate that maximizes revenue.

Risk Premium

The additional return that investors require to compensate them for the risk associated with a particular investment over a risk-free rate.

Snowball Effect

A situation in which a government’s debt continues to grow faster than its GDP, threatening fiscal sustainability.

Technical Recession

Defined as two consecutive quarters of negative GDP growth.

Debt Sustainability

A measure of whether a country can meet its current and future debt repayments without requiring debt relief or accumulating further debt.

Budget Deficit

A financial situation where a government's expenditures exceed its revenues.

Capital Outflows

The movement of capital from one country to another, which reflects investments in foreign assets or withdrawal of local investments.

Gross National Product (GNP)

The total market value of all final goods and services produced by the residents of a country in a given time period, regardless of where the production takes place.

Balance of Payments

A record of all economic transactions between residents of a country and the rest of the world, including trade, investment, and transfer payments.

Inflation

The rate at which the general level of prices for goods and services rises, eroding purchasing power.

Unemployment Rate

The percentage of the labor force that is jobless and actively seeking employment.

Monetary Policy

The actions undertaken by a nation's central bank to control money supply and interest rates.

Fiscal Policy

Government policies regarding taxation and spending aimed at influencing economic conditions.

Opportunity Cost

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

Stagflation

An economic condition characterized by slow economic growth and relatively high unemployment—economic stagnation—accompanied by inflation.

Deflation

The reduction of the general price level of goods and services, often associated with a decline in demand.

Recession

A significant decline in economic activity across the economy lasting longer than a few months, typically visible in GDP, income, employment, and trade.

Consumer Price Index (CPI)

A measure that examines the weighted average of prices of a basket of consumer goods and services, used to assess price changes associated with the cost of living.

Aggregate Supply (AS)

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

Monetary Base

The total amount of a country's currency in circulation or in the central bank's reserves.

Liquidity

The availability of liquid assets to a market or company, indicating how quickly assets can be converted to cash.

Exchange Rate

The value of one currency for the purpose of conversion to another, affecting international trade.

Quantitative Easing (QE)

A monetary policy where a central bank buys long-term securities to increase the money supply and lower interest rates.

Consumer Confidence Index (CCI)

An indicator that measures the degree of optimism consumers feel about the overall state of the economy.

Structural Unemployment

A form of unemployment that arises from a mismatch between the skills of the labor force and the needs of employers.

Circular Flow of Income

An economic model illustrating the flow of money and goods in an economy between households and businesses.

Pigovian Tax

A tax imposed on activities that generate negative externalities, aimed at correcting an inefficient market outcome.

Crowding Out

A situation where increased government spending leads to a reduction in private sector investment.

Phantom Inflation

A situation where prices are rising not because of supply and demand but due to other factors like taxation or regulation.

Reflation

An economic policy aimed at increasing the levels of output and spending in the economy, often through monetary and fiscal stimulus.

Hyperinflation

An extremely high and typically accelerating inflation, often exceeding 50% per month.

Trade Balance

The difference between the value of a country's exports and imports over a certain period.

Pigovian Subsidy

A subsidy designed to encourage activities that yield positive externalities.

Real Interest Rate

The interest rate adjusted for inflation; it reflects the true cost of borrowing.

Nominal GDP

The market value of all final goods and services produced in an economy during a specific time period, measured using current prices.

Capitalism

An economic system characterized by private ownership of the means of production and competition in the marketplace.

Keynesian Economics

An economic theory advocating for increased government expenditures and lower taxes to stimulate demand and pull the economy out of recession.

Supply Shock

An unexpected event that suddenly changes the supply of a product or commodity, leading to a significant impact on price.

Consumer Sovereignty

The theory that consumers' preferences determine the production of goods and services.