Macroeconomics Flashcards

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Questions and Answers

What is macroeconomics?

The study of the economy as a whole.

What does gross domestic product (GDP) measure?

The dollar value of all final goods and services produced within the country's borders in a given year.

What is the consumer price index (CPI)?

A measure of the overall cost of the goods and services bought by a typical consumer.

What is inflation?

Rise in the general level of prices. Signup and view all the answers

What is deflation?

Sustained fall in the general price level. Signup and view all the answers

What is stagflation?

High unemployment and high inflation at the same time. Signup and view all the answers

What is the national debt?

The total amount of money owed by a nation's government to its creditors. Signup and view all the answers

What is the national deficit?

The difference between the amount a government brings in through taxes and sends out through spending. Signup and view all the answers

What is economic growth?

When a nation's total output of goods and services increases over time. Signup and view all the answers

What is cyclical unemployment?

Unemployment caused by a business cycle recession. Signup and view all the answers

What is structural unemployment?

Unemployment resulting from a poor match of workers' abilities and skills with current requirements of employers. Signup and view all the answers

What is frictional unemployment?

People who are temporarily between jobs (including those new to the workforce). Signup and view all the answers

What is seasonal unemployment?

When people lose their jobs predictably every year at the same time. Signup and view all the answers

What is fiscal policy?

Use of government spending and revenue collection measures to influence the economy. Signup and view all the answers

What is monetary policy?

Policies that control the supply of money, the price of money and the availability of credit. Signup and view all the answers

What is aggregate demand?

The total demand for goods and services in the economy. Signup and view all the answers

What is aggregate supply?

The total quantity of output producers are willing and able to supply at alternative price levels in a given time period. Signup and view all the answers

What is the business cycle?

The ups and downs (phases) through time of the level of overall economic activity (real GDP). Signup and view all the answers

What is expansion in economic terms?

A period in which real GDP, income, and employment rise. Signup and view all the answers

What is a recession?

An extended decline in business activity. Signup and view all the answers

What is a depression?

A sharp reduction in an economy's total output accompanied by high unemployment lasting more than a year. Signup and view all the answers

What is The Federal Reserve?

The central monetary authority of the US. Signup and view all the answers

What is The Federal Open Market Operations Committee?

Decides how monetary policy should be carried out by the Federal Reserve. Signup and view all the answers

What is the reserve requirement?

A percentage of commercial banks' checking and savings accounts that must be physically kept in the bank. Signup and view all the answers

What are open market operations?

The purchase or sale of US government securities (bonds) by the Fed. Signup and view all the answers

What is a tight money policy?

Monetary policy that makes credit expensive and in short supply in an effort to slow the economy. Signup and view all the answers

What is a loose money policy?

Monetary policy that makes credit inexpensive and abundant, possibly leading to inflation. Signup and view all the answers

What is contraction in economic terms?

Period of economic decline. Signup and view all the answers

Study Notes

Macroeconomics Overview

Macroeconomics examines the economy as a whole, focusing on broad economic factors and their impact.

Key Economic Indicators

Gross Domestic Product (GDP): Measures the dollar value of all final goods and services produced within a country's borders annually.
Consumer Price Index (CPI): Gauges the overall cost of goods and services typically purchased by consumers, reflecting inflation trends.

Inflation Dynamics

Inflation: Represents a general rise in prices, indicating reduced purchasing power over time.
Deflation: A sustained decline in the general price level, often associated with decreased economic activity.
Stagflation: A problematic combination of high unemployment and high inflation simultaneously.

Government Finance

National Debt: Total monetary obligation a nation's government owes to its creditors.
National Deficit: The shortfall when government expenditures exceed revenues from taxes.

Economic Growth and Employment

Economic Growth: Occurs when a nation's total output of goods and services increases consistently over time.
Cyclical Unemployment: Arises during periods of economic recession, linked to downturns in the business cycle.
Structural Unemployment: Results from mismatches between workers' skills and employers' needs.
Frictional Unemployment: Involves temporary job transitions, including those entering the workforce for the first time.
Seasonal Unemployment: Predictable job loss occurring at the same time each year due to seasonal demand fluctuations.

Economic Policies

Fiscal Policy: Government strategies concerning spending and tax collection aimed at influencing economic conditions.
Monetary Policy: Encompasses actions managing money supply, pricing, and availability of credit within the economy.

Supply and Demand

Aggregate Demand: The total demand for goods and services in an economy, pivotal in determining overall economic health.
Aggregate Supply: The total output that producers are willing and able to supply at various price levels during specific time frames.

Business Cycle Phases

Business Cycle: Characterized by fluctuations in economic activity over time, marked by phases of expansion and recession.
Expansion: A phase where real GDP, income, and employment rise, signifying economic growth.
Recession: An ongoing decline in business activity; a critical phase of the business cycle towards economic downturn.
Depression: An extended period of significant economic decline with high unemployment and a substantial reduction in output lasting over a year.

Monetary Authority

The Federal Reserve: The central monetary authority in the United States, overseeing the nation’s monetary policy.
Federal Open Market Operations Committee: Key decision-making body that implements monetary policy strategies.
Reserve Requirement: A regulation determining the minimum percentage of reserves banks must hold against their deposits.
Open Market Operations: The Federal Reserve's buying or selling of government securities to influence money supply.

Monetary Policies

Tight Money Policy: Restrictive monetary policy making credit costly and scarce to slow economic growth.
Loose Money Policy: Expansive monetary policy providing cheap and abundant credit, potentially leading to inflation.

Economic Decline

Contraction: Refers to a period of economic decline, implying reduced output and activity in the economy.

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Description

Test your knowledge of key macroeconomic terms with these flashcards. This quiz focuses on essential concepts such as GDP, CPI, and inflation. Perfect for students looking to reinforce their understanding of macroeconomic principles.