Macroeconomics Graphs Flashcards

Study Notes

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.

Description

Test your knowledge of key macroeconomic concepts with these flashcards. From the Production Possibilities Curve to the Loanable Funds Market, each card provides essential definitions to help you understand economic principles better. Perfect for students preparing for exams or anyone interested in macroeconomic theory.