Economics 101: Unemployment, Wages, and Aggregate Demand

These flashcards cover key economic concepts discussed in the lecture relating to unemployment, wages, inflation, aggregate demand, and the Great Depression.

Sticky Wages

A phenomenon where wages fail to adjust downwards during a recession, leading to prolonged unemployment.

Money Illusion

A situation where people are more upset by a nominal wage cut than a decrease in real wages due to inflation.

Nominal Wages

The wages that are stated in monetary terms and do not account for inflation.

Real Wages

Wages adjusted for inflation that reflect the actual purchasing power of income.

Aggregate Demand (AD) Shocks

Rapid shifts in the aggregate demand curve that can lead to business fluctuations.

Velocity of Money (v)

The rate at which money changes hands in an economy, affecting spending growth.

Animal Spirits

A term popularized by John Maynard Keynes referring to the instincts and emotions that drive human behavior in economic contexts.

Negative Real Shocks

Events that decrease the economy's productive capacity, such as natural disasters or financial crises.

Great Depression

A severe worldwide economic downturn that began in 1929 and led to plummeting GDP and soaring unemployment.

Fiscal Policy

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

Consumer Confidence

The degree of optimism that consumers feel about the overall state of the economy and their personal financial situation.

Inflation Rate

The percentage change in the price level of goods and services over a specific period.

Aggregate Supply (AS)

The total supply of goods and services produced within an economy at a given overall price level in a given time period.

Nominal Wage Cut

A reduction in the stated wages of workers that can negatively affect morale and productivity.

Deflation

A decrease in the general price level of goods and services, increasing the real value of money.