ECON 300 Final - Definitions.pdf

ECON 300 Final - Definitions Study online at https://quizlet.com/_f0u2lf 1. inflation an increase in the general level of prices 2. deflation a decrease in the general level of prices 3. Consumer Price an index that measures the cost of all goods and services Index to a typical consumer "the cost of...

ECON 300 Final - Definitions Study online at https://quizlet.com/_f0u2lf 1. inflation an increase in the general level of prices 2. deflation a decrease in the general level of prices 3. Consumer Price an index that measures the cost of all goods and services Index to a typical consumer "the cost of living index" 4. CPI _____ = current year cost/base year cost x 100 5. Inflation Rate ____ = (given year's CPI-previous year's CPI)/previous year's CPI x 100 6. disinflation a reduction in the rate of inflation 7. nominal income the actual number of dollars received over a period of time "money income" 8. real income the actual number of dollars received adjusted for changes in the CPI (Consumer Price Index) 9. real income _______ = nominal income/CPI 10. wealth the value of the things you own ex. real estate, stocks, bonds, cars, etc. 11. nominal interest the actual interest rate without adjusting for inflation rate 12. real interest rate _____ = nominal rate of interest - the inflation rate 13. Adjustable Rate a home loan with an interest rate that can change due to Mortgage changes in CPI rates 14. Demand Pull In- A rise in the general price level resulting from an excess flation of total spending (demand) "too much $ chasing too few goods" 15. Cost Push Infla- A rise in the general price level resulting from an increase tion in the cost of production 1/5 ECON 300 Final - Definitions Study online at https://quizlet.com/_f0u2lf 16. hyperinflation extremely rapid rise in the general price level 17. psychosis eagerly spending money before the price increases caused by hyperinflation 18. credit market col- occurs when borrowers cannot pay back their dues lapse caused by hyperinflation 19. wage-price spiral higher prices cause higher nominal wages caused by hyperinflation 20. speculation people invest in assets to gain wealth, instead of investing in technology or machines that help expand the economy's PPC (production possibilities curve) caused by hyperinflation 21. aggregate demand curve a curve that shows the relationship between the price level and the quantity of real GDP demanded by households, firms, and the government - "total dollar amount" - slopes downward 22. real balances ef- The inverse relationship between the price level and the fect real value of financial assets with fixed nominal value causes the impact on total spending (real GDP). price level decreases -> increase in wealth -> people buy more -> real GDP increases 23. Interest Rate Ef- The direct relationship between price level and the interest fect rate causes the impact on total spending (real GDP). price level decreases -> interest rates fall -> people borrow more money -> real GDP increases 24. Net exports effect The inverse relationship between price level and net exports price level decreases -> US goods net exports rise -> real GDP increases 25. aggregate supply a curve representing the relationship between the econocurve my's price level and real GDP supplied 2/5 ECON 300 Final - Definitions Study online at https://quizlet.com/_f0u2lf "total dollar amount of goods and services produced in an economy" 26. Keynesian View a view of the Aggregate supply curve "demand creates its own supply" the price level is unchanged as Aggregate Demand changes the supply curve is horizontal 27. Classical View a view of the aggregate supply curve "supply creates its own demand" the price level changes as aggregate demand changes the supply curve is vertical 28. Keynesian range a range in the aggregate supply curve horizontal segment that represents a severe recession (1) in the image 29. Intermediate Range a range in the supply curve a rising segment that represents the economy is approaching full employment output (2) in the image 30. classical range a range in the supply curve a vertical segment that represents full employment output (3) in the image 3/5 ECON 300 Final - Definitions Study online at https://quizlet.com/_f0u2lf 31. stagflation occurs when the economy experiences both high unemployment levels and rapid inflation 32. demand choice-making behavior of consumers the curve shows the quantity of goods/services consumers are willing to buy 33. market demand the sum of all the individual demands for a particular good or service 34. nonprice determinants "change in demand" things other than price that cause a SHIFT in the demand curve 35. price determinant "change in quantity demanded" price change that cause a movement along the demand curve 36. substitute goods two competing goods for consumer purchase "choose one or the other" 37. complementary goods goods that are consumed jointly with each other "go together goods" 38. law of supply principle that states a direct relationship between the price and quantity supplied 39. supply curve A curve showing the relation between the price of a good and the quantity producers are willing and able to sell 40. market supply horizontal sum of all individual quantities supplied by each seller in the market at each price 41. movement a change in the quantity supplied 4/5 ECON 300 Final - Definitions Study online at https://quizlet.com/_f0u2lf 42. shift a change in supply 43. surplus market condition: quantity supplied is greater than quantity demanded 44. shortage market condition: quantity supplied is less than quantity demanded 45. equilibrium market condition: quantity supplied is equal to the quantity demanded 46. price ceilings a price control system: a MAXIMUM price that can be legally charged for a good or service causes: illegal activity, increased opportunity costs, and discrimination 47. price floors a price control system: the MINIMUM price that can be legally charged for a good or service causes: unemployment 48. market failure occurs when the market equilibrium causes an inefficient allocation of resources 49. increase ________ in supply causes a surplus of goods 50. decrease _______ in supply causes a shortage of goods 51. decrease _______ in demand causes a surplus of goods 52. increase ______ in demand causes a shortage of goods 5/5