Macroeconomics Vocab

Macroeconomics

Study of how an overall economy behaves.

Perfect Competition

Many producers supply an identical product and no single producer can influence its price

Monopolistic Competionion

Many producers supply similar but varied products

Oligopoly

A few producers dominate the market and produce similar or identical goods

Monopoly

A single producer supplies a unique product that has no close substitute

GDP

Market value of all final goods and services within a country during a given time period. Some things are not included like unpaid work (such as that performed in the home or by volunteers) and black-market activities

GDP Formula

Consumer Spending + Business Investments + Government Spending + Net Exports

Real GDP

GDP adjusted for inflation

Nominal GDP

GDP in current dollars

Inflation

An increase in average prices of ALL goods and services in an economy, causing the value of a dollar to decrease

Hyperinflation

Unusually rapid/extreme inflation

Consumer Price Index

Measures the yearly cost of a shopping cart full of things American tend to buy in a year (market basket)

Deflation

A decrease in average prices of ALL goods and services in an economy

Labor Force

Portion of the population that has paid work or is looking for work (remember the job activity)

Unemployment Rate

Percentage of the labor force that is not employed but is actively seeking work

Frictional Unemployment

A person enters the workforce for the first time or quits one job to seek another

Structural Unemployment

Advances in technology elimiate jobs

Cyclical Unemployment

Decline in business activity results in fewer jobs

Seasonal Unemployment

Jobs are eliminated when businesses shut down or slow down for part of the year

Business Cycle

Recurring pattern of growth and decline in economic activity (expansion, peak, contraction, tough)

Aggregate Demand

Total amount of demand for all finished goods and services produced in an economy

Aggregate Supply

Total amount of goods and services that producers are willing and able to sell at a given price level in an economy

Recession

Decline in economic activity lasting at least six months

Fiscal Policy

Government use of taxing and spending to stimulate economic growth or slow inflation

Contractionary Fiscal Policy

Slowing economic activity by decreasing government spending, rasing taxes or both

Expansionary Fiscal Policy

Promoting economic activity by increasing government spending, cutting taxes or both

Monetary Policy

Central ban’s use of interest rates and money supply to stimulate economic growth or slow inflation

Federal Reserve

Central bank of the United States responsible for setting interest rates, managing the money supply, and regulating financial markets

Contractionary Monetary Policy

Slowing economic growth (and reducing inflation) by decreasing money supply

Expansionary Monetary Policy

Stimulating economic growth by increasing money supply