Macroeconomics Graphs Flashcards

Production Possibilities Curve

• Illustrates the maximum output of two goods that an economy can produce using available resources efficiently.
• Represents trade-offs and opportunity costs of shifting resources between different sectors.

Circular Flow Chart

• Depicts the flow of money, goods, and services in an economy.
• Shows interactions between households, businesses, and the government.

Aggregate Demand and Aggregate Supply

• Aggregate Demand represents total demand for goods and services within a given economy at a specific time.
• Aggregate Supply indicates the total supply of goods and services available to a market at a given price level.

Cost-Push Inflation

• Occurs when production costs increase, leading to a decrease in supply and an increase in prices.
• Can be triggered by rising wages, increased raw material costs, or supply chain disruptions.

Loanable Funds Market

• Market where savers supply funds and borrowers demand funds, influencing interest rates.
• Equilibrium in this market determines the amount of investment in an economy.

The Short-Run Phillips Curve

• Illustrates the inverse relationship between inflation and unemployment in the short run.
• Suggests that reducing unemployment can lead to higher inflation.

Recessionary Gap

• Occurs when actual economic output is less than potential output, indicating underutilization of resources.
• Frequently associated with rising unemployment rates and diminished demand.

The Long-Run Phillips Curve

• Suggests there is no trade-off between inflation and unemployment in the long run; they are not inversely related.
• Reflects the natural rate of unemployment where the economy can sustain without causing inflation to rise.

Economic Growth

• Refers to an increase in the production of goods and services over a period, often measured by GDP.
• Sustainable economic growth impacts living standards and can reduce poverty levels.

Inflationary Gap

• Exists when actual output exceeds potential output, often leading to upward pressure on prices.
• Indicates an overheating economy, frequently accompanied by low unemployment rates.

The Money Market Curve

• Represents the interaction of the supply and demand for money in an economy.
• Influences interest rates based on the equilibrium between money supply and money demand.

The Foreign Exchange Market

• Market for trading national currencies against one another, affecting exchange rates.
• Plays a crucial role in international trade, investments, and forex reserves management.

Demand-Pull Inflation

• Arises when overall demand for goods and services exceeds supply, driving prices up.
• Can be triggered by increased consumer spending, government spending, or investment.

Investment Demand Curve

• Illustrates the relationship between interest rates and the quantity of investment demanded.
• Generally slopes downward, indicating that lower interest rates stimulate more investment spending.