Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
26 Cards in this Set
- Front
- Back
|
Macroeconomics
|
Study of they economy as a whole
|
|
|
Microeconomics
|
Study of consumers, producers, and suppliers operating in a narrowly defined market.
|
|
|
GDP
|
The total market value of all final goods and services produced within the borders of a nation in a particular time period.
|
|
|
Nominal GDP
|
Measures the value of all final goods and services in current prices - no inflation adjustment.
|
|
|
Real GDP
|
Adjusted to account for changes in the price level (it removes the effects of inflation using a price index)
|
|
|
Price Index/GDP Deflator
(Equation for Real GDP) |
Nominal GDP/GDP Deflator X 100
|
|
|
Expansionary Phase
|
Rising economic activity (real GDP) and growth.
|
|
|
Peak
|
A high point of economic activity.
|
|
|
Contractionary Phase
|
Falling economic activity and growth and follows a peak.
|
|
|
Trough
|
A low point of economic activity.
|
|
|
Recovery Phase
|
Follows a trough. Economic activity begins to increase and return to its long-term growth trend.
AKA-expansionary phase |
|
|
Recession
|
Two consecutive quarters of falling national output.
|
|
|
Depression
|
A very severe recession.
|
|
|
What are three economic indicators?
|
1. leading indicators
2. lagging indicators 3. coincident indicators |
|
|
Leading Indicators
|
Tend to predict economic activity...
average new unemployment claims, building permits for residences, average length of the workweek, money supply, prices of selected stocks, orders for goods, price changes of materials, index of consumer expectations. |
|
|
Lagging Indicators
|
Tend to follow economic activity...
Prime rate charged by banks, average duration of unemployment, bank loans outstanding. |
|
|
Coincident Indicators
|
Tend to occur coincident to economic activity...
Industrial production, manufacturing and trade sales. |
|
|
Business cycles result from...
|
...shifts in aggregate demand and/or aggregate supply.
|
|
|
What is the effect of a REDUCTION in demand on GDP and Prices?
|
AD curve shifts left.
AD decreases. GDP decreases. Price decreases. |
|
|
What is the effect of an INCREASE in demand on GDP and Prices?
|
AD curve shifts right.
AD increases. GDP increases. Price increases. |
|
|
What is the effect of a REDUCTION of supply on GDP and Prices?
|
SRAS shifts left (decreases)
GDP decreases. Price increases. |
|
|
What is the effect of an INCREASE of supply on GDP and Prices?
|
SRAS shifts right (increase)
GDP increases. Price decreases. |
|
|
What are SIX factors that shift aggregate demand?
|
1. Changes in Wealth
2. Changes in real interest rates 3. changes in consumer confidence 4. Changes in exchange rates 5. Changes in govt. spending 6. Changes in consumer taxes. |
|
|
Multiplier effect
|
An increase in consumer, firm, or govt spending, produces a multiplied increase in the level of economic activity.
|
|
|
Formula for the Multiplier Effect
|
1/(1-MPC) x Change in Spending
MPC-Marginal Propensity to Consume MPS-Marginal Propensity to Save MPS= 1 - MPC |
|
|
What are TWO factors that shift short-run aggregate supply?
|
1. Changes in input (resource) prices
2. Supply Shocks |
