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Macroeconomics Overview
Basics of macroeconomics
38
Economics
Undergraduate 1
08/14/2012

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Term
Economics
Definition
social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity
Term
Positive Statements
Definition
focus on facts and cause-and-effect relationships
Term
Normative Statements
Definition
incorporate value judgments about what the economy should be like
Term
Law of Increasing Opportunity Cost
Definition
As production of particular good increases, opportunity cost of producing additional unit rises
Term
Change in Demand
Definition
Consumer tastes, number of buyers, income, prices of related goods, consumer expectations
Term
Change in Supply
Definition
Resource prices, technology, taxes and subsidies, prices of other goods, producer expectations, number of sellers
Term
Government Expenditures
Definition
expenditures for goods and services that government consumes in providing public services and expenditures for publicly owned capital
Term
Private Goods
Definition
only people who are willing and able to pay for a product to obtain its benefits and when one person buys and consumes a product, it is not available for another person to buy and consume
Term
Public Goods
Definition
Once a producer has provided it, everyone can obtain the benefit
Term
Business Cycle
Definition
long-run economic growth and short-tun fluctuations in output and employment
Term
Peak
Definition
business activity has reached a temporary maximum
Term
Recession
Definition
period of decline in total output, income, and employment
Term
Trough
Definition
output and employment "bottom out" at their lowest levels
Term
Expansion
Definition
period in which real GDP, income, and employment rise
Term
Expenditures Approach
Definition
C + I + G + X = GDP
Term
National Income
Definition
Compensation of employees + Rent + Interest + Proprietor's Income + Corporate Profits + Taxes on production and imports
Term
GDP
Definition
National Income + Statistical Discrepancy + Consumption of fixed capital - Net foreign factor income
Term
CPI (consumer price index)
Definition
(Price of most recent market basket in the particular year/ Price estimate of market basket in past) * 100
Term
Inflation
Definition
Rise in general level of prices in an economy
Term
Labor Force
Definition
People 16+ who are not in institutions and who are employed or are unemployed and seeking work
Term
Unemployment Rate
Definition
(Unemployed/labor force) * 100
Term
Increases in Aggregate Demand
Definition
Demand-pull inflation
Term
Demand-pull Inflation
Definition
Increases in the price level resulting from an excess of demand over output at the existing price level
Term
Decreases in Aggregate Demand
Definition
Recession and Cyclical Unemployment
Term
Decreases in Aggregate Supply
Definition
Cost-push Inflation
Term
Cost-push Inflation
Definition
Increases in the price level resulting from an increase in resource costs and hence in per-unit production costs
Term
Increases in Aggregate Supply
Definition
Full employment with price-level stability
Term
Long-run equilibrium
Definition
Aggregate demand curve intersects with vertical long-run supply curve and short-run aggregate supply curve
Term
Fiscal Policy
Definition
deliberate changes in government spending and tax collections designed to achieve full employment, control inflation, and encourage economic growth
Term
Contractionary fiscal policy
Definition
Government spending reductions, tax increases, designed to decrease aggregate demand and eliminate inflation
Term
Money
Definition
Any item that is generally acceptable to sellers in exchange for goods and services
Term
Bank
Definition
accepts deposits, makes loans, and offers checking accounts
Term
Depository Institutions
Definition
Commercial banks, savings and loan associations, mutual savings banks, credit unions
Term
Granting a Loan
Definition
Loans are created, reserves decrease, and checkable deposits remain the same
Term
Expansionary Monetary Policy
Definition
Federal Reserve System actions to increase the money supply, lower interest rates, and expand real GDP
Term
Monetary Policy Tools
Definition
securities, reserve ratio, discount rate, Term auction facility
Term
Balance of on capital and financial account
Definition
Sum of capital account balance and financial account balance
Term
Capital Account
Definition
Section of the nation's international balance of payments that records debt forgiveness by and to foreigners and foreign purchases of assets in the US and US purchases of assets abroad
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