Unit 3: Macroeconomics

macroeconomics

study of how all the parts of an economy work together

gross domestic product (GDP)

total value of all goods and services produced in a country in one year

consumer price index (CPI)

used to measure price changes for market basket of goods

inflation

rise in the general level of prices

unemployment rate

rate ratio of unemployed individuals divided by total number of persons in the work-force

cyclical unemployment

directly related to swings in the business fluctuations

structural unemployment

occurs when a person's skills are replaced by technology

seasonal unemployment

caused by changes during the year (weather or demand)

frictional unemployment

occurs when people decide not to take a job or between jobs

business cycle

alternating period of growth and recession in an economy

expansion

period of recovery from a recession

peak

point where real GDP stops growing

trough

point in time when real GDP stops declining and begins to expand

recession

decline in real GDP lasting for at least six months

The Federal Reserve (Fed)

central bank of the United States

depression

recession that lasts a long time and causes a severe drop in real GDP

monetary policy

actions by the Federal Reserve to expand or contract the money supply

Federal Open Market Committee

part of the Fed that regulate money supply by buying or selling government securities

reserve requirement

formula used to compute the amount of a bank's required reserves

open market operations

the Fed buys and sells government bonds in order to regulate money supply

discount rate

interest rate that the Fed charges on loans to banks

national deficit

the amount each year by which federal outlays in the federal budget exceed federal receipts

national debt

the total amount of money that the United States federal government owes to creditors

fiscal policy

the use of government spending and taxation to influence the economy

nominal GDP

GDP measured in current year prices

real GDP

GDP adjusted for inflation