Human- made equipment such as machinery, buildings, roads, vehicles, and computers.
New cards
2
Economic growth
The ability to produce a larger total output over time.
New cards
3
Opportunity cost
The value of the next-highest-valued alternative use of that resource.
New cards
4
Demand
The different quantities of goods and services that consumers are willing and able to purchase at various price levels.
New cards
5
Production Possibility Curve
A model used to show the tradeoffs associated with allocating resources between the production of two goods.
New cards
6
Macroeconomics
The part of economics concerned with large-scale economic endeavors.
New cards
7
Labor
Human effort and talent, physical and mental
New cards
8
Land or natural resources
Any resource created by nature
New cards
9
Market
Essentially, it is the place in the economy where buyers and sellers perform transactions
New cards
10
Productive efficiency
When the economy is producing the maximum output for a given level of technology and resources
New cards
11
Allocative efficiency
The economy is producing the optimal mix of goods and services
New cards
12
Market failure
When a market fails to produce the allocative efficient quantity
New cards
13
Law of demand
Holding all else equal, when the price of good rises, consumers decrease the quantity demanded of that good
New cards
14
GDP
Measures the economic growth of a country.
New cards
15
Market basket
A collection of goods and services used to represent what is consumed in the economy.
New cards
16
Recession
Unofficially defined as two consecutive quarters of falling real GDP.
New cards
17
Business cycles
The fluctuations in economic activity over time.
New cards
18
Consumers
The people who buy the goods /services in an economy.
New cards
19
GDP deflator
Includes all items that make up domestic products.
New cards
20
Circular flow of economic activity
A model that shows how households and firms circulate resources, goods, and incomes through the economy
New cards
21
Gross domestic product (GDP)
The market value of the final goods and services produced within a nation in a given period
New cards
22
GDP
C + I + G + XN
New cards
23
Investment spending (I)
Investment is defined as current spending to increase output or productivity later
New cards
24
Government spending (G)
Purchases made by the government for final goods and services and investments in infrastructure
New cards
25
Aggregate income (AI)
The sum of all income-Wages + Rent + Interest + Profit-earned by suppliers of resources in the economy
New cards
26
Unemployed
A person is unemployed if they are not currently working but are actively seeking work
New cards
27
Labor force
The sum of all individuals 16 years and older who are either currently employed (E) or unemployed (U)
New cards
28
People not considered to be in the labor force are…
A person is classified as out of the labor force if they have chosen to not seek employment
New cards
29
Unemployment rate
The percentage of the labor force that falls into the unemployed category
New cards
30
Discouraged workers
Citizens who have been without work for so long that they become tired of looking for work and drop out of the labor force
New cards
31
Frictional unemployment
A type of unemployment that occurs when someone new enters the labor market or switches jobs
New cards
32
Structural unemployment
A type of unemployment that is the result of fundamental, underlying changes in the economy such that some job skills are no longer in demand
New cards
33
Cyclical unemployment
A type of unemployment that rises and falls within the business cycle (recession)
New cards
34
Full employment
Exists when the economy is experiencing no cyclical unemployment
New cards
35
Natural rate of unemployment (NRU)
The unemployment rate associated with full employment, somewhere between 4 to 6 percent in the United States
New cards
36
Consumer price index (CPI)
The price index that measures the average price level of the items in the base year market basket
New cards
37
Deflation
the general decrease in prices
New cards
38
Inflation
the general increase in prices
New cards
39
Disinflation
a decrease in the rate of inflation
New cards
40
Inflation rate
the percentage change in aggregate price level across an entire economy in a year
New cards
41
Nominal GDP
The value of current production at the current prices
New cards
42
Real GDP
The value of current production but using prices from a fixed point in time
New cards
43
Base year
The year that serves as a reference point for constructing a price index and comparing real values over time
New cards
44
Price index
A measure of the average level of prices in a market basket for a given year, when compared to the prices in a reference (or base) year
New cards
45
Expansion
A period where real GDP is growing
New cards
46
Peak
The top of a business cycle where an expansion has ended
New cards
47
Contraction
A period where real GDP is falling
New cards
48
Recession
Unofficially defined as two consecutive quarters of falling real GDP
New cards
49
Depression
A prolonged, deep contraction in the business cycle
New cards
50
Trough
The bottom of the cycle where a contraction has stopped
New cards
51
Macroeconomic equilibrium
When the quantity of real output demanded is equal to the quantity of real output supplied.
New cards
52
Marginal propensity to Consume (MPC)
Shows how much people consume rather than save when there is a change in income.
New cards
53
Supply shocks
Affects the costs of firms and the position of the SRAS curve, either positively or negatively.
New cards
54
Multiplier effect
The idea that an initial change in spending will set off a spending chain that is magnified in the economy.
New cards
55
Recessionary gap
The amount by which full- employment GDP exceeds equilibrium GDP.
New cards
56
Fiscal policy
Deliberate changes in government spending and net tax collection affect economic output, unemployment, and the price level.
New cards
57
Contractionary fiscal policy
When the economy operates beyond full employement, inflation becomes a problem, so the government might need to contract the economy.
New cards
58
Expansionary fiscal policy
The increases in government spending or lower net taxes meant to shift AD to the right.
New cards
59
AD curve
When the AD increases, an inflationary gap happens to cause an increase in real GDP to GDPi (lower unemployment rate) and an increase in the aggregate price level to PL2.
New cards
60
Income taxes
An example of an automatic stabilizer during an economic boom or recession.
New cards
61
Inflationary gap
The amount by which equilibrium GDP exceeds full employment GDP.
New cards
62
Aggregate demand
The inverse relationship between all spending on domestic output and the aggregate price level of that output.
New cards
63
Marginal propensity to save (MPS)
Shows how much people save rather than consume when there is a change in income.
New cards
64
Fiscal policy
Designed to manipulate AD to "fix "the economy.
New cards
65
Monetary base
currency in circulation and bank reserves.
New cards
66
Stock
A certificate that represents a claim to, or share of the ownership of a firm
New cards
67
Fiat Money
The paper and coin money used today
New cards
68
Unit of account
Units of currency measure the relative worth of goods and services
New cards
69
Store of value
Money is a relatively good way to store value, when theres no inflation because it keeps its value
New cards
70
Money supply
The quantity of money in circulation as measured by the Federal Reserve (the Fed) as M1 and M2
New cards
71
Liquidity
A measure of how easily an asset can be converted to cash
New cards
72
Reserve Ratio
The fraction of a banks total deposits that are kept on reserve
New cards
73
Reserve requirement
Regulation set by the Fed that states the minimum reserve ratio for banks
New cards
74
Phillips Curve
A graphical device that shows the relationship between inflation and the unemployment rate.
New cards
75
Surplus
When the difference between tax revenues and government spending is positive.
New cards
76
Stagflation
A situation where inflation and the unemployment rate are both increasing.
New cards
77
Crowding out effect
It is the economic theory that public sector spending can lessen or eliminate private sector spending
New cards
78
FOREX Market
When the quantity supplied of the currency equals the quantity demanded of the currency at a specific exchange rate.
New cards
79
Capital (or financial) account
This account shows the flow of investment on real or financial assets between a nation and foreigners
New cards
80
Official reserves account
The Feds adjustment of a deficit or surplus in the current and capital account by the addition or subtraction of foreign currencies so that the balance of payments is zero
New cards
81
Balance of payments deficit
When the US has sent more dollars out than foreign currency has come in while adding the current and capital account
New cards
82
Balance of payment surplus
When more foreign currency was coming into the US than American dollars sent abroad
New cards
83
Exchange rate
The price of one currency in terms of a second currency
Studied by 3 people
