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Chapter 6
Vocabulary & Key Concepts
25
Economics
12th Grade
02/24/2013

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Term
self-regulating economy
Definition
problems such as unemployment are resolved without government intervention, through the working of the invisible hand
Term
Keynesian economics
Definition
economic slumps are caused by inadequate spending & they can be mitigated by government intervention
Term
monetary policy
Definition
uses changes in the quantity of money to alter interest rates & affect overall spending
Term
fiscal policy
Definition
uses changes in government spending & taxes to affect overall spending
Term
before the 1930's, economics tended to regard the economy as _____
Definition
self-regulating
Term
after the Great Depression, _____ provided the rational for government intervention through monetary policy & fiscal policy to help a depressed economy
Definition
Keynesian economics
Term
recessions
Definition
periods of economic downturn when output & employment are falling
Term
expansion
Definition
periods of economic upturn when output & employment are rising
Term
business cycle
Definition
the short-run alternation between recessions & expansions
Term
business-cycle peak
Definition
the point at which the economy turns from expansion to recession
Term
business-cycle trough
Definition
the point at which the economy turns from recession to expansion
Term
the _____, the short-run alternation between recessions & expansions, is a major concern of modern macroeconomists
Definition
business cycle
Term
the point at which expansion shifts to recession is a _____
Definition
business-cycle peak
Term
the point at which recession shifts to expansion is a _____
Definition
business-cycle trough
Term
long-run economic growth
Definition
the sustained upward trend in the economy's output over time
Term
because the US economy has achieved _____, Americans live much better than they did a half-century or more ago
Definition
Term
inflation
Definition
a rising overall level of prices
Term
deflation
Definition
a falling overall level of prices
Term
price stability
Definition
the overall level of prices changes slowly or not at all
Term
because either _____ or _____ can cause problems for the economy, economists typically advocate maintaining price stability
Definition
inflation; deflation
Term
open economy
Definition
an economy that trades goods & services with other countries
Term
trade deficit
Definition
the value of goods & services bought from foreigners is more than the value of goods & services sold to them
Term
trade surplus
Definition
the value of goods & services bought from foreigners is less than the value of the goods & services sold to them
Term
comparative advantage can explain why an _____ exports some goods & services & imports others, but it can't explain why a country imports more than it exports or vice versa
Definition
open economy
Term
_____ & _____ are macroeconomic phenomena, determined by decisions about investment spending & savings
Definition
trade deficits; trade surpluses
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