Transcript Economics Flashcards Unit 2 Microeconomics

Economics Flashcards #75-112
Unit 3
Macroeconomics
75. Macroeconomics
Refers to large-scale economic issues such as
overall economic growth, unemployment rate,
inflation, and government policies.
76. Economic Indicators
• Factors that determine the
general economic health
of a nation.
• These factors include:
Gross Domestic Product
(GDP), Consumer Price
Index (CPI), aggregate
supply and demand, and
unemployment rate.
77. Gross Domestic Product (GDP)
• The value of all goods and services produced by a
country during a specific time (usually a year).
• GDP = C+I+G+Xn
• C = Consumer spendiing
• I = Business Investments
• G = Government Spending
• Xn = Net Exports
78. Consumer Price Index (CPI)
• Measures inflation by determining how the
cost of a standard group of consumer goods
(or “market basket”) has changed over time.
VS
.
2009
2016
79. Inflation
A rise in CPI which shows an overall rise in
prices. (dollar loses value)
80. Aggregate Demand and
Aggregate Supply
The demand or supply for all goods and services
in the economy at different price levels. (equals
to GDP or output)
81. Business Cycle
Measure by real GDP and has 4 phases
(expansionary, peak, contractionary, trough)
82. Expansionary Phase
Period of economic growth measure by a rise in
real GDP
83. Peak
When real GDP stops rising and is the height of
economic expansion.
84. Contraction
Following the peak there is a decline in real GDP.
85. Trough
The lowest point of economic decline and when real
GDP stops falling.
86. Recession
An extra long contraction usually measured by a
decline in real GDP for two consecutive quarters
(6 months)
87. Depression
A severely prolonged contraction and recession.
88. Stagflation
 A period of inflation along with a contractionary
period (decline in real GDP)
 Inflation refers to rising prices in a growing
economy, but stagflation occurs when prices rise in
a stagnant economy.
89. Labor Force
Employed + unemployed (people not working
who are actively looking for work)
+
90. Types of Unemployment
Structural
Frictional
Cyclical
Seasonal
91. Seasonal Unemployment
Unemployment due to a change in the seasons
(snow ski instructor in the summer)
92. Structural Unemployment
Unemployment resulting from people’s skills no
longer matching up with the available jobs.
93. Frictional Unemployment
Unemployment always present and is where
people are in transition and not taking the first
job available (graduating college, moving, etc).
94. Cyclical Unemployment
Unemployment caused by a decline in the
business cycle.
95. Full Employment
Level of unemployment when there is no cyclical
unemployment.
96. Underemployment
Working for jobs that people are not trained for.
(College grad. digging ditches)
97. Discouraged Workers
When people have given up looking for work.
No longer part of the labor force.
98. Budget Deficit
When the government spends (expenditures)
more than it brings in (tax revenue)/ yearly
figure.
99. National Debt
Total amount owed by the government to those
from whom it has borrowed to finance the
accumulated differences between yearly budget
deficits and yearly budget surpluses.
100. Federal Reserve System
• (The FED) Our nation’s bank
• Its main function is to control the money supply
through monetary policy.
101. FED’s 12 District Banks
• 12 district banks that serve the needs of the
regions they’re located/ private or
decentralized part of the FED.
102. Board of Governors
• The government part of the FED and the Federal
Open Market Committee (FOMC).
• 7 members appointed by the President,
approved by the Senate, and reside in
Washington, DC.
103. Federal Open Market
Committee (FOMC)
• Consists of 12 members:
the 7 members from the Board of Governors
+
5 of the district bank presidents
• Work to determine monetary policy.
104. Monetary Policy
Tools used by the FED to stabilize the economy.
105. Monetary Policy Tools
• Discount rate
• Reserve Requirements
• Buying and selling of government securities.
106. Discount Rate
Interest rate the FED charges commercial banks for
loans.
107. Reserve Requirements
The percentage of a bank’s deposits that the banks
have to keep in their vaults and can’t loan out.
108. Contractionary Monetary Policy
• Actions taken by the FED (Federal Reserve
Bank) to slow the economy (GDP).
– 1. Raise Interest (Discount) rates.
– 2. Raise Reserve Requirements.
– 3. Sell Govt. securities (Bonds).
109. Expansionary Monetary Policy
• Actions taken by the FED to grow
economy.
• 1. Lower discount rate
• 2. Lower Reserve Requirements
• 3. Buy govt. securities (Bonds)
110. Fiscal Policy
Taxing and spending by the government to
influence the economy.
111. Contractionary Fiscal Policy
-Actions taken by the govt. to slow the economy
– 1. Raise taxes
– 2. Lower Government spending.
112. Expansionary Fiscal Policy
• Actions taken by the govt. to grow the
economy.
• 1. Lower taxes
• 2. Raise govt. spending.