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15 Cards in this Set
- Front
- Back
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What is Aggregate Demand?
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The total amount of goods and services demanded in the economy at a given overall price level and in a given time period. It is represented by the aggregate-demand curve, which describes the relationship between price levels and the quantity of output that the firms are willing to provide. Normally there is a negative relationship between the aggregate demand and the price level, also known as “total spending”.
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What is Aggregate Supply?
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The total supply of goods and services produced within an economy at a given overall price level in a given time period. It is represented by the aggregate-supply curve, which describes the relationship between price levels and the quantity of output that firms are willing to provide. Normally, there is a positive relationship between aggregate supply and the price level. Rising prices are usually signals for businesses to expand production to meet a higher level of aggregate demand.
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What is Economic Growth?
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An increase in the capacity of an economy to produce goods and services, compared from one period of time to another. Economic growth can be measured in nominal terms, which include inflation, or in real terms, which are adjusted for inflation....
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What is Unemployment?
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Each month, the federal government's Bureau of Labor Statistics randomly surveys sixty thousand individuals around the nation. If respondents say they are both out of work and seeking employment, they are counted as unemployed members of the labor force. Jobless respondents who have chosen not to continue looking for work are considered out of the labor force and therefore are not counted as unemployed....
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What is Full Employment?
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Just as there is no regularity in the timing of business cycles, there is no reason why cycles have to occur at all. The prevailing view among economists is that there is a level of economic activity, often referred to as full employment, at which the economy theoretically could stay forever. Full employment refers to a level of production at which all the inputs to the production process are being used, but not so intensively that they wear out, break down, or insist on higher wages and more vacations. If nothing disturbs the economy, the full-employment level of output, which naturally tends to grow as the population increases and new technologies are discovered, can be maintained forever. There is no reason why a time of full employment has to give way to either a full-fledged boom or a recession....
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What is Fiscal Policy?
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Fiscal policy is the use of the government budget to affect an economy. When the government decides on the taxes that it collects, the transfer payments it gives out, or the goods and services that it purchases, it is engaging in fiscal policy. The primary economic impact of any change in the government budget is felt by particular groups—a tax cut for families with children, for example, raises the disposable income of such families. Discussions of fiscal policy, however, usually focus on the effect of changes in the government budget on the overall economy....
Government spending policies that influence macroeconomic conditions. These policies affect tax rates, interest rates and government spending, in an effort to control the economy. |
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What is GDP?
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Gross domestic product, the official measure of total output of goods and services in the U.S. economy, represents the capstone and grand summary of the world's best system of economic statistics....
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What is Inflation?
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Inflation is the loss in purchasing power of a currency unit such as the dollar, usually expressed as a general rise in the prices of goods and services....
We have many measures of inflation, but none provides a truly reliable gauge of inflation at any specific time. The most widely watched measure is the consumer price index (CPI), published monthly by the Bureau of Labor Statistics. Subindexes are available for different cities and for many different classes of goods and services.... |
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What is the Consumer Price Index?
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The Consumer Price Index (CPI) is a measure of the costs of purchasing the representative bundle of goods and services consumed by urban households during a period relative to a base period. It is used to perform three important functions: (i) determine whether general prices are higher, lower or stable over time, (ii) calculate the annual rate of inflation, and (iii) convert nominal values to real. (This conversion allows us to adjust prices, wages and incomes for differences in the general level of prices across time periods.)...
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What is Monetary Policy?
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Monetary policy is generally referred to as either being an expansionary policy, or a contractionary policy, where an expansionary policy increases the total supply of money in the economy, and a contractionary policy decreases the total money supply. Expansionary policy is traditionally used to combat unemployment in a recession by lowering interest rates, while contractionary policy has the goal of raising interest rates to combat inflation (or cool an otherwise overheated economy). Monetary policy should be contrasted with fiscal policy, which refers to government borrowing, spending and taxation.
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What is Federal Reserve System
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The Federal Reserve System (the Fed) has been the central bank of the United States since it was created in 1913. The main purpose of a central bank is to regulate the supply of money and credit to the economy. The board of governors, the Fed's principal policy-making organization, plays a key role in this process....
The responsibility for regulating the nation's money supply requires the Federal Reserve to influence the amount of reserve funds available to banks and thus the level and direction of short-term interest rates. For example, whether banks and other financial institutions will make loans depends on the profit margin—the difference in the rate of interest they must pay to attract deposits or borrow funds and the interest rate they can charge customers for credit. The greater the profit margin that banks can realize on new loans, the more they will want to lend. To influence interest rates on deposits and interest rates that banks pay to borrow funds, the Fed uses its congressionally granted authority to create money. The Fed creates money in three ways.... |
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What is Real vs. Nominal?
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Definition: The nominal value of a good is its value in terms of money. The real value is its value in terms of some other good, service, or bundle of goods.
Examples: Nominal: That CD costs $18. Japan's science and technology spending is about 3 trillion yen per year. Real: A year of college costs about the value of a Toyota Camry. Those tickets to see Van Halen cost me three weeks' worth of food! Relative price is another term for the real price of a good or service. When we say that the relative price of computers has fallen in recent years, we mean that the price of computers relative to or measured in terms of other goods and services—such as TVs or cars—has declined. Relative prices of individual goods and services can decrease even if nominal prices are all increasing, because of inflation. |
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What is Recession?
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A recession is the term used to describe a period of declining output (decreasing quanities of goods and services produced). Economists define a recession as at least two consecutive quarters (6 months) of falling output
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What is Depression?
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A depression is a prolonged and deep recession in which ouput declines by more than ten percent.
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What are three economic indicators?
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GDP, Consumer Price Index, and the unemployment rate
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