Questions and Answers
What is disposable income?
What is an inflationary gap?
Equilibrium at a level of output above potential GDP
What is the interest rate?
The payment for borrowed money
What is a recessionary gap?
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What is the coordination argument?
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What is the expenditure multiplier?
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What is a macroeconomic externality?
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What are menu costs?
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What are sticky wages and prices?
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What is the Expenditure (or Spending) Multiplier?
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What is the Marginal Propensity to Consume?
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What is the Marginal Propensity to Import?
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What is the Marginal Propensity to Save?
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What is contractionary fiscal policy?
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What is expansionary fiscal policy?
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What is the GDP gap?
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What is Classical economics?
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What is Neoclassical economics?
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What is Say's Law?
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What is human capital?
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What is the natural rate of unemployment?
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What is the neoclassical perspective?
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What is physical capital per person?
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What is potential GDP?
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What is Keynes' law?
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Who are neoclassical economists?
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What is the intermediate zone?
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What is the Keynesian zone?
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Study Notes
Core Economic Concepts
- Disposable Income: Income remaining after taxes are deducted, influencing consumer spending.
- Interest Rate: The cost incurred for borrowing money, impacting investment decisions.
- Potential GDP: The maximum possible output when all resources are fully utilized.
Economic Gaps
- Inflationary Gap: Occurs when the economy operates above its potential GDP, causing upward pressure on prices.
- Recessionary Gap: Represents a situation where actual output is below potential GDP, suggesting economic underperformance.
Keynesian Theories and Principles
- Expenditure Multiplier: A Keynesian concept indicating that a change in autonomous spending results in a more than proportional change in real GDP.
- Keynes' Law: Asserts that "demand creates its own supply," emphasizing the role of aggregate demand in driving economic activity.
- Marginal Propensity to Consume (MPC): The percentage of additional income that is spent on consumption, which directly influences economic growth.
- Marginal Propensity to Save (MPS): The fraction of additional income that is saved rather than spent, impacting overall savings and investment in the economy.
Neoclassical Perspectives
- Neoclassical Economics: Encompasses theories asserting that the economy is generally stable, advocating minimal government intervention.
- Say's Law: The principle that supply creates its own demand, highlighting the proactive nature of production in the economy.
- Natural Rate of Unemployment: The unemployment level achieved when the economy is operating at full potential, devoid of cyclical unemployment.
Costs and Flexibility
- Menu Costs: Expenses incurred by firms when adjusting prices, potentially causing price stickiness.
- Sticky Wages and Prices: Refers to the resistance of wages and prices to adjust in response to changes in supply and demand, complicating economic adjustments.
Fiscal Policies
- Expansionary Fiscal Policy: Strategies aimed at increasing aggregate demand through tax reductions or increased government spending.
- Contractionary Fiscal Policy: Measures intended to decrease aggregate demand via tax hikes or cuts in government expenditure.
Externalities and Economic Zones
- Macroeconomic Externality: Arises when macro-level outcomes differ unfavorably from micro-level interactions; for example, a flat aggregate supply despite rising firm-level supply.
- Intermediate Zone: Segment of the short-run aggregate supply curve where GDP is below potential but not severely, reflecting a state of economic recovery.
- Keynesian Zone: The portion of the short-run aggregate supply curve where GDP significantly lags behind potential output.
Capital and Productivity
- Human Capital: Skills, training, and education possessed by workers that enhance productivity and economic performance.
- Physical Capital per Person: The quantity and quality of equipment and machinery available to individuals for producing goods and services.
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Description
Explore essential terms from Keynesian and Neoclassical economics with this set of flashcards. Each card includes a key economic term along with its definition, providing a quick and effective study tool for students. Ideal for learners looking to grasp fundamental economic concepts and terminology.