Macroeconomics Overview Quiz

When government spending exceeds tax revenue in a fiscal year.

When tax revenue exceeds government spending in a fiscal year.

A budget deficit that occurs when the economy is at full employment.

A budget deficit that occurs during a recession.

The total amount of government debt accumulated over time.

A budget surplus that occurs when the economy is at full employment.

A budget surplus that occurs during an economic boom.

The total amount of government debt accumulated over time.

Higher taxation means individuals and businesses pay more taxes, which can reduce disposable income and potentially decrease economic activity.

Lower government spending can lead to reduced investment in public services like education, healthcare, and infrastructure, potentially affecting quality and accessibility.

Decreased demand for goods and services in the economy due to lower government spending and higher taxes.

The possibility of higher income inequality when reduced government spending and increased taxation disproportionately impact certain income groups.

The amount of a business's net income that is kept within its accounts, rather than paid out to shareholders.

When firms spend money on capital goods (e.g., machinery, buildings) to increase their productive capacity.

The minimum required rate of return that a firm needs for an investment project to be considered worthwhile. It depends on factors like interest rates, risk associated with the project, and expectations of future profitability.

The tendency for investment to change more than proportionally compared to changes in real Gross Domestic Product (GDP). If GDP grows, investment will grow even faster, and vice versa.

Spending by governments on goods and services that benefit the public.

The amount by which investment spending changes in response to a change in national income or GDP.

The tax rate imposed by a government on the profits of corporations.

The cost of borrowing money, often expressed as a percentage.

Actions taken by the central bank to influence aggregate demand (AD) by adjusting interest rates, the money supply, and the exchange rate.

A type of monetary policy aimed at increasing aggregate demand by lowering interest rates, increasing the money supply, and potentially weakening the exchange rate.

A type of monetary policy aimed at decreasing aggregate demand by raising interest rates, reducing the money supply, and potentially strengthening the exchange rate.

A situation where lower interest rates fail to stimulate the economy. This can happen when interest rates hit their lower bound (usually 0%).

Policies designed to increase the economy's productive capacity by influencing factors like education, technology, and infrastructure. These shifts LRAS to the right.

The process by which an expansionary monetary policy affects the economy. It involves lower interest rates leading to increased consumption, investment, and net exports.

A potential negative consequence of expansionary monetary policy. It occurs when excessive demand pulls up prices.

A potential negative consequence of expansionary monetary policy. It occurs when a country imports more than it exports, leading to a decline in the balance of payments.

The process of shifting the economy from a recessionary gap towards full employment. This requires increasing aggregate demand, potentially through expansionary monetary policy.

The process of shifting the economy from an inflationary gap towards full employment. This requires decreasing aggregate demand, potentially through contractionary monetary policy.

Policies that aim to increase the long-term productive capacity of an economy by increasing the quantity or quality of factors of production, or improving efficiency.

Policies that aim to directly increase aggregate demand in the economy, often through government spending, tax cuts, or lower interest rates.

A type of SSP that involves government intervention, such as increasing education spending, investing in infrastructure, or providing subsidies to promote investment.

A type of SSP that relies on market mechanisms to promote long-run growth, such as tax cuts, deregulation, or trade liberalization.

The gap between the actual level of output and the potential level of output in an economy.

Unemployment caused by a lack of demand for goods and services in the economy, often during recessions. This happens when the aggregate demand (AD) is very low.

Unemployment caused by wages being artificially too high, preventing the labor market from clearing. This happens when wages are higher than the equilibrium price, resulting in a surplus of labor.

Unemployment caused by a mismatch between the skills and locations of job seekers and the available job vacancies. This includes both occupational and geographical immobility of labor.

Unemployment caused by people being temporarily between jobs. This happens when individuals search for new opportunities or experience a temporary layoff.

A situation where prices rise due to increased costs of production, such as raw materials, labor, or energy. This can be triggered by external shocks like a weak exchange rate or high oil prices.

A type of economic policy designed to increase output and employment, typically by increasing government spending or decreasing taxes. This can lead to higher economic growth but also higher inflation.

A type of economic policy designed to reduce inflation by decreasing government spending or increasing taxes. This can lead to lower inflation but also potentially lower economic growth and higher unemployment.