Macro Economy System

Front 1

What does GDP stand for and define it?

Back 1

- Gross Domestic Product: market value of all final goods and services produced within a country in a year.
- Final goods are purchased by the last user and will not be resold or used to produce anything else.

Front 2

What are 4 components of GDP?

Back 2

1) C: Consumer Spending
2) I: Business Investment Spending
3) G: Government Spending
4) NX: Net Export Spending

Front 3

What is the business cycle?

Back 3

- is the periodic but irregular up-and-down movements in economic activity, measured by fluctuations in real GDP and other macroeconomic variables.

Front 4

What are the stages of business cycle?

Back 4

1) Expansion
2) Peak
3) Contraction
4) Trough

Front 5

What is consumer price index?

Back 5

- index of all goods and services produced in a country
- measured by a market "basket" of all goods and services that are commonly bought year after year.

Front 6

Increasing and decreasing in the prices lead to what?

Back 6

- increasing in prices lead to inflation and decrease in the prices lead to deflation.

Front 7

What is hyperinflation? Give an example.

Back 7

- rapid inflation
Ex: Germany money after WWII

Front 8

What is stagflation?

Back 8

-rising pricing with falling GDP and rising unemployment

Front 9

What is the relationship between GDP, unemployment and CPI?

Back 9

- as GDP rises, unemployment rates fall and prices begin to rise.
- as GDP falls unemployment rises and prices begin to decline.

Front 10

What is aggregate demand?

Back 10

- aggregate demand: is total demand for ALL FINAL goods and services in the economy not just from 1 person but from all people in the economy - for a range of prices levels.

Front 11

What are 3 tools to manipulate the money supply?

Back 11

1) Open Market Operations: buying and selling of treasure bonds.
2) Discount Rate: percent rate the federal changes banks for loans.
3) Reserve Requirement: percent of all deposits banks must hold.

Front 12

What is monetary policy?

Back 12

- Increase Money Supply (recession): buy bonds, decrease discount rate, decrease reserve requirement.
- Decrease Money Supply (depression): sell bonds, increase discount rate, and increase reserve requirement.

Front 13

What is fiscal policy and name two type of fiscal policy? Define them.

Back 13

- changes in federal government spending or tax revenue designed to promote full employment, price stability, and reasonable rates of economic growth.
1) Expansionary Fiscal Policy: increase in government spending and/or decrease in taxes designed to increase aggregate demand.
2) Contractionary Fiscal Policy: decrease in government spending and/or increase in taxes designed to decrease aggregate demand.

Front 14

What are different type of taxes?

Back 14

1) Progressive: taxes that increase as your income increases (income tax)
2) Regressive: tax that decreases as your income increases (sales tax)
3) Proportional: tax amount that stays the same as your income increases (property tax)

Front 15

Define 3 types of government spending.

Back 15

1) Government Transfer payment: payments the government gives our but gets nothing in return.
2) Government Purchase: goods and services bought by the government.
3) Government interest payments: interest paid on loans the government owes.