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27 Cards in this Set
- Front
- Back
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Paradox of Thrift |
people worry about economic hard time so they quit spending. |
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Main causes of Great depression |
1. Stock market crash - banks invested customers money' - no FDIC insurance 2. Banks failed 3. Reduced spending because no one had money to spend 4. uneven distribution of goods 5. smoot-harley tariff 6. Dust bowl |
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Microeconomics |
Focuses on how decisions are made by individuals and firms and the consequences of those decisions
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Macroecon |
Focuses on aggregate behavior of the economy |
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Econ theory BEFORE GD |
Self-regulating: The economy 'did its own thing' -short term problems -things will eventually even out and go back to normal |
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Econ theory AFTER GD |
Keynesian theory: there were economic slumps because of inadequate spending -market is imperfect -consumer income stimulates demand, not production -when Consumer demand is lacking, Government should stimulate demand (gov mitigation) |
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Business cycle |
short run alteration between recession and expansion |
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Recession |
When employment and output are FALLING -economic downturn |
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The National Bureau of Economic Research determines the beg/ end of a recession |
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Employment |
Number of working people in the economy |
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Unemployment |
number of people actively looking for a job but are not currently employed |
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Labor force |
unemployed + employed |
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Discouraged workers |
number of people who are able to work but are not actively looking |
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underemployment |
number of people who work during a recession but are getting fewer wages and hours |
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3 types of unemployment |
1. Cyclical 2. Frictional 2. Structural |
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Unemployment rate |
# of unemployed ____________________________________ # of unemployed + # of employed |
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Jobless recoveries |
when the economy is in an expansion but the unemployment rate doesn't go down |
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Reasons for jobless recoveries |
1.JIT Inventory ( gives more flexibility to business) 2. JIT Technology (replaces people) 3. globalization 4. job polarization (income inequality, structural employment) |
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Government stabilization |
1. Monetary policy: changes the quantity of money to alter interest rates 2. Fiscal policy: changes government spending and taxes |
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Real GDP and long run growth |
REAL GDP: GDP that is adjusted for changes in price over time (used for long run growth) long run growth: sustained upward trend in economies output overtime |
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Aggregate price level |
Overall prices in economy -RISE in aggregate prices = Inflation -FALL in aggregate prices = Deflation |
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Price stability |
-overall level of prices changes slowly or not at all |
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Open Economy |
Open to trade with other countries around the world |
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Trade deficit |
Exports < Imports |
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Trade surplus |
Exports > Imports |
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National Accounts |
Track economies condition throughout the business cycle -tacks consumer spending, investment spending, sales of produce, et |
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Flows IN/ OUT of Households |
Flows IN: -Factor income (wages, rent, investment, profit) -Government Transfers -Flows OUT: -consumer spending |
