An Introduction to Macroeconomics;
Measuring Domestic Output and National Income; Economic Growth;
Business Cycles, Unemployment, and Inflation;
Basic Macroeconomics Relationships
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| 346175107 | business cycle | Recurring increases and decreases (fluctuations) in the level of in economic activity over periods of years; consists of peak, recession, trough, and expansion phases. (such as employment and production) | |
| 346175109 | economics | the study of how society manages its scarce resources | |
| 346175111 | efficiency | the property of society getting the most it can from its scarce resources | |
| 346175113 | equality | the property of distributing economic prosperity uniformly among the members of society | |
| 346175115 | externality | the impact of one person's actions on the well-being of a bystander | |
| 346175117 | incentive | something that induces a person to act | |
| 346175120 | inflation | A rise in the general level of prices in an economy. | |
| 346175122 | marginal changes | small incremental adjustments to a plan of action | |
| 346175124 | market economy | an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services | |
| 346175126 | market failure | a situation in which a market left on its own fails to allocate resources efficiently | |
| 346175128 | market power | the ability of a single economic actor (or small group of actors) to have a substantial influence on market prices | |
| 346175129 | opportunity cost | whatever must be given up to obtain some item | |
| 346175131 | productivity | the quantity of goods and services produced from each unit of labor input | |
| 346175133 | property rights | the ability of an individual to own and exercise control over scarce resources | |
| 346175135 | rational people | people who systematically and purposefully do the best they can to achieve their objectives | |
| 346175136 | scarcity | the limited nature of society's resources | |
| 346175137 | circular-flow diagram | a visual model of the economy that shows how dollars flow through markets among households and firms | |
| 346175138 | macroeconomics | the study of economy-wide phenomena, including inflation, unemployment, and economic growth | |
| 346175139 | microeconomics | the study of how households and firms make decisions and how they interact in markets | |
| 346175140 | normative statements | claims that attempt to prescribe how the world should be | |
| 346175141 | positive statements | claims that attempt to describe the world as it is | |
| 346175142 | production possibilities frontier | a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology | |
| 346175143 | absolute advantage | the ability to produce a good using fewer inputs than another producer | |
| 346175144 | comparative advantage | the ability to produce a good at a lower opportunity cost than another producer | |
| 346175145 | exports | goods produced domestically and sold abroad | |
| 346175146 | imports | goods produced abroad and sold domestically | |
| 346175147 | opportunity cost | whatever must be given up to obtain some item | |
| 346175148 | competitive market | a market in which there are many buyers and many sellers so that each has a negligible impact on the market price | |
| 346175149 | complements | two goods for which an increase in the price of one leads to a decrease in the demand for the other | |
| 346175150 | demand curve | a graph of the relationship between the price of a good and the quantity demanded | |
| 346175151 | demand schedule | a table that shows the relationship between the price of a good and the quantity demanded | |
| 346175152 | equilibrium | a situation in which the market price has reached the level at which quantity supplied equals quantity demanded | |
| 346175153 | equilibrium price | the price that balances quantity supplied and quantity demanded | |
| 346175154 | equilibrium quantity | the quantity supplied and the quantity demanded at the equilibrium price | |
| 346175155 | inferior good | a good for which, other things equal, an increase in income leads to a decrease in demand | |
| 346175156 | law of demand | the claim that, other things equal, the quantity demanded of a good falls when the price of the good rises | |
| 346175157 | law of supply | the claim that, other things equal, the quantity supplied of a good rises when the price of the good rises | |
| 346175158 | law of supply and demand | the claim that the price of any good adjusts to bring the quantity supplied and the quantity demanded for that good into balance | |
| 346175159 | market | a group of buyers and sellers of a particular good or service | |
| 346175160 | normal good | a good for which, other things equal, an increase in income leads to an increase in demand | |
| 346175161 | quantity demanded | the amount of a good that buyers are willing and able to purchase | |
| 346175162 | quantity supplied | the amount of a good that sellers are willing and able to sell | |
| 346175163 | shortage | a situation in which quantity demanded is greater than quantity supplied | |
| 346175164 | substitutes | two goods for which an increase in the price of one leads to an increase in the demand for the other | |
| 346175165 | supply curve | a graph of the relationship between the price of a good and the quantity supplied | |
| 346175166 | supply schedule | a table that shows the relationship between the price of a good and the quantity supplied | |
| 346175167 | surplus | a situation in which quantity supplied is greater than quantity demanded | |
| 346175168 | consumption | spending by households on goods and services, with the exception of purchases of new housing | |
| 346175169 | GDP deflator | a measure of the price level calculated as the ratio of nominal GDP to real GDP times 100 | |
| 346175170 | government purchases | (G) Expenditures by government for goods and services tat government consumes in providing public goods and services that government consumes in providing public goods and for public (social) capital that has a long lifetime; the expenditures of all governments in the economy for those final goods and services. (spending on goods and services by local, state, and federal governments). | |
| 346175171 | gross domestic product (GDP) | The total market value of all final goods and services produced annually, within the boundaries within a country (ex.United States), whether by U.S.-or foreign-supplied resources. | |
| 346175172 | investment | spending on capital equipment, inventories, and structures, including household purchases of new housing | |
| 346175173 | macroeconomics | the study of economy-wide phenomena, including inflation, unemployment, and economic growth | |
| 346175174 | microeconomics | the study of how households and firms make decisions and how they interact in markets | |
| 346175175 | net exports | spending on domestically produced goods by foreigners (exports) minus spending on foreign goods by domestic residents (imports) | |
| 346175176 | nominal GDP | the production of goods and services valued at current prices | |
| 346175177 | real GDP | The Real Gross Domestic Product adjusted for inflation gross domestic in a year divided by the GDP price index for that year, index expressed as a decimal. | |
| 346175178 | consumer price index (CPI) | a measure of the overall cost of the goods and services bought by a typical consumer | |
| 346175179 | indexation | the automatic correction by law or contract of a dollar amount for the effects of inflation | |
| 346175180 | inflation rate | the percentage change in the price index from the preceding period | |
| 346175181 | nominal interest rate | the interest rate as usually reported without a correction for the effects of inflation | |
| 346175182 | producer price index | a measure of the cost of a basket of goods and services bought by firms | |
| 346175183 | real interest rate | the interest rate corrected for the effects of inflation | |
| 346175184 | catch-up effect | the property whereby countries that start off poor tend to grow more rapidly than countries that start off rich | |
| 346175185 | diminishing returns | the property whereby the benefit from an extra unit of an input declines as the quantity of the input increases | |
| 346175186 | human capital | the knowledge and skills that workers acquire through education, training, and experience | |
| 346175187 | natural resources | the inputs into the production of goods and services that are provided by nature, such as land, rivers, and mineral deposits | |
| 346175188 | physical capital | the stock of equipment and structures that are used to produce goods and services | |
| 346175189 | productivity | the quantity of goods and services produced from each unit of labor input | |
| 346175190 | technological knowledge | society's understanding of the best ways to produce goods and services | |
| 346175191 | bond | a certificate of indebtedness | |
| 346175192 | budget deficit | a shortfall of tax revenue from government spending | |
| 346175193 | budget surplus | an excess of tax revenue over government spending | |
| 346175194 | crowding out | a decrease in investment that results from government borrowing | |
| 346175195 | financial intermediaries | financial institutions through which savers can indirectly provide funds to borrowers | |
| 346175196 | financial markets | financial institutions through which savers can directly provide funds to borrowers | |
| 346175197 | financial system | the group of institutions in the economy that help to match one person's saving with another person's investment | |
| 346175198 | market for loanable funds | the market in which those who want to save supply funds and those who want to borrow to invest demand funds | |
| 346175199 | mutual fund | an institution that sells shares to the public and uses the proceeds to buy a portfolio of stocks and bonds | |
| 346175200 | national saving (saving) | the total income in the economy that remains after paying for consumption and government purchases | |
| 346175201 | private saving | the income that households have left after paying for taxes and consumption | |
| 346175202 | public saving | the tax revenue that the government has left after paying for its spending | |
| 346175203 | stock | a claim to partial ownership in a firm | |
| 346175204 | compounding | the accumulation of a sum of money in, say, a bank account, where the interest earned remains in the account to earn additional interest in the future | |
| 346175205 | diversification | the reduction of risk achieved by replacing a single risk with a large number of smaller, unrelated risks | |
| 346175206 | efficient markets hypothesis | the theory that asset prices reflect all publicly available information about the value of an asset | |
| 346175207 | finance | the field that studies how people make decisions regarding the allocation of resources over time and the handling of risk | |
| 346175208 | firm-specific risk | risk that affects only a single company | |
| 346175209 | fundamental analysis | the study of a company's accounting statements and future prospects to determine its value | |
| 346175210 | future value | the amount of money in the future that an amount of money today will yield, given prevailing interest rates | |
| 346175211 | informational efficiency | the description of asset prices that rationally reflect all available information | |
| 346175212 | market risk | risk that affects all companies in the stock market | |
| 346175213 | present value | the amount of money today that would be needed, using prevailing interest rates, to produce a given future amount of money | |
| 346175214 | random walk | the path of a variable whose changes are impossible to predict | |
| 346175215 | risk aversion | a dislike of uncertainty | |
| 346175216 | collective bargaining | the process by which unions and firms agree on the terms of employment | |
| 346175217 | cyclical unemployment | the deviation of unemployment from its natural rate | |
| 346175218 | discouraged workers | individuals who would like to work but have given up looking for a job | |
| 346175219 | efficiency wages | above-equilibrium wages paid by firms to increase worker productivity | |
| 346175220 | frictional unemployment | unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills | |
| 346175221 | job search | the process by which workers find appropriate jobs given their tastes and skills | |
| 346175222 | labor force | the total number of workers, including both the employed and the unemployed | |
| 346175223 | labor-force -participation rate | the percentage of the adult population that is in the labor force | |
| 346175224 | natural rate of unemployment | the normal rate of unemployment around which the unemployment rate fluctuates | |
| 346175225 | strike | the organized withdrawal of labor from a firm by a union | |
| 346175226 | structural unemployment | unemployment that results because the number of jobs available in some labor markets is insufficient to provide a job for everyone who wants one | |
| 346175227 | unemployment insurance | a government program that partially protects workers' incomes when they become unemployed | |
| 346175228 | unemployment rate | the percentage of the labor force that is unemployed | |
| 346175229 | union | a worker association that bargains with employers over wages, benefits, and working conditions | |
| 346175230 | central bank | an institution designed to oversee the banking system and regulate the quantity of money in the economy | |
| 346175231 | commodity money | money that takes the form of a commodity with intrinsic value | |
| 346175232 | currency | the paper bills and coins in the hands of the public | |
| 346175233 | demand deposits | balances in bank accounts that depositors can access on demand by writing a check | |
| 346175234 | discount rate | the interest rate on the loans that the Fed makes to banks | |
| 346175235 | federal funds rate | the interest rate at which banks make overnight loans to one another | |
| 346175236 | Federal Reserve (Fed) | the central bank of the United States | |
| 346175237 | fiat money | money without intrinsic value that is used as money because of government decree | |
| 346175238 | fractional-reserve banking | a banking system in which banks hold only a fraction of deposits as reserves | |
| 346175239 | liquidity | the ease with which an asset can be converted into the economy's medium of exchange | |
| 346175240 | medium of exchange | an item that buyers give to sellers when they want to purchase goods and services | |
| 346175241 | monetary policy | the setting of the money supply by policymakers in the central bank | |
| 346175242 | money | the set of assets in an economy that people regularly use to buy goods and services from other people | |
| 346175243 | money multiplier | the amount of money the banking system generates with each dollar of reserves | |
| 346175244 | money supply | the quantity of money available in the economy | |
| 346175245 | open-market operations | the purchase and sale of U.S. government bonds by the Fed | |
| 346175246 | reserve ratio | the fraction of deposits that banks hold as reserves | |
| 346175247 | reserve requirements | regulations on the minimum amount of reserves that banks must hold against deposits | |
| 346175248 | reserves | deposits that banks have received but have not loaned out | |
| 346175249 | store of value | an item that people can use to transfer purchasing power from the present to the future | |
| 346175250 | unit of account | the yardstick people use to post prices and record debts | |
| 346175251 | classical dichotomy | the theoretical separation of nominal and real variables | |
| 346175252 | Fisher effect | the one-for-one adjustment of the nominal interest rate to the inflation rate | |
| 346175253 | inflation tax | the revenue the government raises by creating money | |
| 346175254 | menu costs | the costs of changing prices | |
| 346175255 | monetary neutrality | the proposition that changes in the money supply do not affect real variables | |
| 346175256 | nominal variables | variables measured in monetary units | |
| 346175257 | quantity equation | the equation M × V = P × Y relates the quantity of money, the velocity of money, and the dollar value of the economy's output of goods and services | |
| 346175258 | quantity theory of money | a theory asserting that the quantity of money available determines the price level and that the growth rate in the quantity of money available determines the inflation rate | |
| 346175259 | real variables | variables measured in physical units | |
| 346175260 | shoeleather costs | the resources wasted when inflation encourages people to reduce their money holdings | |
| 346175261 | velocity of money | the rate at which money changes hands | |
| 346175262 | appreciation | an increase in the value of a currency as measured by the amount of foreign currency it can buy | |
| 346175263 | balanced trade | a situation in which exports equal imports | |
| 346175264 | closed economy | an economy that does not interact with other economies in the world | |
| 346175265 | depreciation | a decrease in the value of a currency as measured by the amount of foreign currency it can buy | |
| 346175266 | net capital outflow | the purchase of foreign assets by domestic residents minus the purchase of domestic assets by foreigners | |
| 346175267 | net exports | the value of a nation's exports minus the value of its imports; also called the trade balance | |
| 346175268 | nominal exchange rate | the rate at which a person can trade the currency of one country for the currency of another | |
| 346175269 | open economy | an economy that interacts freely with other economies around the world | |
| 346175270 | purchasing-power parity | a theory of exchange rates whereby a unit of any given currency should be able to buy the same quantity of goods in all countries | |
| 346175271 | real exchange rate | the rate at which a person can trade the goods and services of one country for the goods and services of another | |
| 346175272 | trade balance | the value of a nation's exports minus the value of its imports; also called net exports | |
| 346175273 | trade deficit | an excess of imports over exports | |
| 346175274 | trade surplus | an excess of exports over imports | |
| 346175275 | capital flight | a large and sudden reduction in the demand for assets located in a country | |
| 346175276 | trade policy | a government policy that directly influences the quantity of goods and services that a country imports or exports | |
| 346175277 | aggregate-demand curve | a curve that shows the quantity of goods and services that households, firms, the government, and customers abroad want to buy at each price level | |
| 346175278 | aggregate-supply curve | a curve that shows the quantity of goods and services that firms choose to produce and sell at each price level | |
| 346175279 | depression | a severe recession | |
| 346175280 | model of aggregate demand and aggregate supply | the model that most economists use to explain short-run fluctuations in economic activity around its long-run trend | |
| 346175281 | natural rate of output | the production of goods and services that an economy achieves in the long run when unemployment is at its normal rate | |
| 346175282 | recession | a period of declining real incomes and rising unemployment | |
| 346175283 | stagflation | a period of falling output and rising prices | |
| 346175284 | automatic stabilizers | changes in fiscal policy that stimulate aggregate demand when the economy goes into a recession without policymakers having to take any deliberate action | |
| 346175285 | crowding-out effect | the offset in aggregate demand that results when expansionary fiscal policy raises the interest rate and thereby reduces investment spending | |
| 346175286 | fiscal policy | the setting of the level of government spending and taxation by government policymakers | |
| 346175287 | multiplier effect | the additional shifts in aggregate demand that result when expansionary fiscal policy increases income and thereby increases consumer spending | |
| 346175288 | theory of liquidity preference | Keynes's theory that the interest rate adjusts to bring money supply and money demand into balance | |
| 346175289 | natural-rate hypothesis | the claim that unemployment eventually returns to its normal, or natural, rate, regardless of the rate of inflation | |
| 346175290 | Phillips curve | a curve that shows the short-run trade-off between inflation and unemployment | |
| 346175291 | rational expectations | the theory that people optimally use all the information they have, including information about government policies, when forecasting the future | |
| 346175292 | sacrifice ratio | the number of percentage points of annual output lost in the process of reducing inflation by 1 percentage point | |
| 346175293 | supply shock | an event that directly alters firms' costs and prices, shifting the economy's aggregate-supply curve and thus the Phillips curve |
