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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