Macroeconomics Chapter 5 Midterms

Front 1

Economy

Back 1

describes the structure of economic life, economic activity, in a community, a region, a country, a group of countries, or the world.

Front 2

Gross Domestic Product

Back 2

the market value of all final goods and services produced in the nation during a particular period, usually a year.

Front 3

Gross Product

Back 3

which measures the market value of final goods and services produced in a particular geographical region during a period, one year.

Front 4

Gross World Product

Back 4

the market value of all final goods and services produced in the world during a given period, usually a year.

Front 5

Flow Variable

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a variable that measures something over an interval of time, such as your income per week.

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Stock Variable

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a variable that measures something at a particular point in time, such as the amount of money you have with you right now.

Front 7

Mercantilism

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the incorrect theory that a nation’s economic objective should be to accumulate precious metals in the public treasury; this theory promoted trade barriers to cut imports, but other countries retaliated, reducing trade and the gains from specialization.

Front 8

Economic Flactuations

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the rise and fall of economic activity relative to the long-term growth trend of the economy; also called business cycles

Front 9

Expansion

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a period during which the economy’s output increases

Front 10

Contraction

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a period during which the economy’s output declines

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Depression

Back 11

a sharp reduction in an economy’s total output accompanied by high unemployment lasting more than a year.

Front 12

Recession

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a sustained decline in the economy’s total output lasting at least two consecutive quarters, or six months; an economic contraction

Front 13

Inflation

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an increase in the economy’s average price level

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Production increased because of

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a) increases in the amount and quality of resources, especially labor & capital
b) better technology
c) improvements in the rules of the game that facilitate production and exchange

Front 15

Leading Economic Indicators

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variables that predict, or lead to, a recession or recovery; examples include consumer confidence, stock market prices, business investment, and big-ticket purchases, such as automobiles and homes

Front 16

Coincident Economic Indicators

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variables that reflect peaks and troughs in economic activity as they occur; examples include employment, personal income, and industrial production.

Front 17

Lagging Economic Indicators

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variables that follow, or trail, changes in overall economic activity; examples include the interest rate and the average duration of unemployment.

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Aggregate Output

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a composite measure of all final goods and services produced in an economy during a given period; real GDP

Front 19

Aggregate Demand

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the relationship between the economy’s price level and aggregate output demanded, with other things constant

Front 20

Price Level

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a composite measure reflecting the prices of all goods and services in the economy relative to prices in a base year

Front 21

Real gross domestic product (real GDP)

Back 21

the economy’s aggregate output measured in dollars of constant purchasing power

Front 22

Aggregate Demand Curve

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a curve representing the relationship between the economy’s price level and real GDP demanded per period, with other things constant

Front 23

Aggregate Supply Curve

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a curve representing the relationship between the economy’s price level and real GDP supplied per period, with other things constant

Front 24

Federal Budget Deficit

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a flow variable measuring the amount by which federal government outlays exceed federal government revenues in a particular period, usually a year

Front 25

Demand-side Economics

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macroeconomic policy that focuses in shifting the aggregate demand curve as a way of promoting full employment and price stability

Front 26

Stagflation

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a contraction, or stagnation, of a nation's output accompanied by inflation in the price level

Front 27

Supply-side Economics

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macroeconomic policy that focuses on a rightward shift of the aggregate supply curve through tax cuts or other changes to increase production incentives

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Federal Debt

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a stock variable that measures the net accumulation of annual federal deficits

Front 29

Real GDP Per Capita

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real GDP divided by the population; the best measure if an economy's standard of living

Front 30

Discuss macroeconomics and the national economy

Back 30

Macroeconomics concerns the overall performance of the national economy. A standard measure of performance is the growth of real gross domestic product, or real GDP, the value of final goods and services produced in the nation during the year.

Front 31

Discuss economic fluctuations and growth.

Back 31

The economy fluctuates between two phases: periods of expansion and periods of contraction. No two business cycles are the same.

Front 32

Explain aggregate demand and aggregate supply.

Back 32

The aggregate demand curve slopes downward, reflecting a negative or inverse relationship between the price level and real GDP demanded. The aggregate supply curve slopes upward, reflecting a positive or direct relationship between the price level and real GDP supplied. The intersection of the two curves determines the economy’s real GDP and price level.

Front 33

Describe the history of U.S. Economy

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John Maynard Keynes- economy is unstable.