AP Macroeconomics- Chapter 17 Flashcards

9472463861	nominal/current GDP/GDP	the total value of all new goods and services produced in an economy during a specified period of time the general without change in the price level (inflation or deflation) being taken into account. It includes spending by consumers (C) + businesses (I) + the government (G) + foreigners (X) (net exports: exports-imports)	0
9472463862	real GDP (Y)/real output/output of production	a country's GDP that is adjusted to take into account the general change in prices (inflation and deflation) over time (from year to year)	1
9472463863	real GDP (Y) per capita	the average production per person in a country; a country's real GDP divided by the number of people in the country's population	2
9472463864	price level	the measurement of current prices of goods and services produced in the economy in a specific region or country at a specific time	3
9472463865	annual growth rate of real GDP (Y) per capita	the percentage increase in the real GDP per capita in a country each year from the previous year	4
9472463866	economic fluctuation/business cycles	small increases or decreases in a country's real GDP (Y) above or below the diagonal potential GDP line	5
9472463867	potential GDP	the straight and angled upward trend line in real GDP (Y); it represents the long-run tendency of the economy in a country to grow	6
9472463868	recession	a situation where the real GDP (Y) in a country is lower than the potential GDP at the full employment level; the economy operates below the full employment level; when the decline lasts for 6 or more months	7
9472463869	real income	income adjusted for changes in prices (inflation or deflation)	8
9472463870	peak	the highest point in an economy before the start of a recession	9
9472463871	expansion	the period between recessions in an economy, from the trough to the next peak	10
9472463872	trough	the lowest point in an economy at the end of a recession and before the recovery and expansion	11
9472463873	recovery	the early part of an expansion in an economy after a trough	12
9472463874	short-run (SR) economic growth rate	the percentage increase in a country's real GDP (Y) each year from the previous year	13
9472463875	long-run (LR) economic growth rate	the percentage increase in a country's real GDP (Y) each year over the long-run (4-5 years and beyond)	14
9472463876	unemployment rate	a percentage; the number of unemployed people in a country divided by the number in the labor force; the labor force consists of those who are at least 16 and either working or looking for work	15
9472463877	full employment	unemployment around 3-5% in a country; not everyone has a job, but there are acceptable reasons why, like those who lost a job or those getting retrained to get another one; during full employment, all available resources are being used in an economy	16
9472463878	inflation	a situation where the real GDP (Y) in a country is more than the potential GDP at the full employment level; the economy operates above the full employment level	17
9472463879	inflation rate	the percentage increase in the average price level of all goods and services in a country from one year to the next	18
9472463880	demand-pull inflation	when inflation is caused by an excess of aggregate demand (AD) vs. supply, (AS), like after natural disasters occur; demand pulls inflation up	19
9472463881	sticky price	a price for goods or services that does not respond immediately to changing economic conditions	20
9472463882	cost-push inflation	inflation caused by an increase in prices of inputs like labor, raw material, etc.; the cost of inputs push inflation up	21
9472463883	deflation	when the average price (P) level falls	22
9472463884	interest rate	the amount that lenders charge when they lend money, expressed as a percentage of the amount loaned	23
9472463885	fixed interest rate	an interest rate that does not change; whatever the rate is at the start of the loan is the same rate at the end	24
9472463886	nominal interest rate	the interest rate on a loan, making no adjustments for changes in the price level (inflation or deflation)	25
9472463887	real interest rate	the nominal interest rate minus the inflation rate; a loan at 6% with inflation at 20% gives a real interest rate of -14%,	26
9472463888	federal funds rate	the short-term interest rate banks charge other banks on overnight loans; this rate can be impacted up or down by the Federal Reserve (the "Fed") but them buying or selling bonds	27
9472463889	short-run aggregate supply (SRAS)	all of the goods and services produced in the short-run (up to one year out) by all of the firms in an economy using the available labor, capital, and technology; the curve is sloped to the right	28
9472463890	short-run equilibrium	short-run (SR) equilibrium is a state where aggregate supply (AS) equals aggregate demand (AD) in the short-run (SR) (less than 1 year)	29
9472463891	long-run aggregate supply (LRAS)	all of the goods and services produced in the long-run (3-5 years out) by all of the firms in an economy using the available labor, capital, and technology; the curve is perfectly vertical; on this line an economy is at full employment, full output, and the natural rate of unemployment	30
9472463892	long-run equilibrium	long-run (LR) equilibrium is a state where long-run aggregate supply (LRAS) equals aggregate demand (AD) in the long-run (SR) (3-5 years and beyond); where real GDP (Y) equals potential GDP	31
9472463893	capital goods	goods created in order to produce other goods	32
9472463894	consumer goods	good created for consumer purchase	33
9472463895	aggregate demand (AD)	the total amount that consumers (C), businesses (I), the government (G), and foreigners (net exports (X) will spend on all goods and services in an economy	34
9472463896	supply-side policies	economic policies made by Congress that aim to increase long-term economic growth; fiscal policies made by the government that concentrate on increasing the growth of potential GDP, which is the aggregate supply (AS) of the economy	35
9472463897	fiscal policy	government policy concerning taxing, spending, and borrowing in a country	36
9472463898	demand-side policies	monetary policies made by the Fed that are used to influence economic fluctuations; policies that aim to influence aggregate demand (AD) in an economy	37
9472463899	monetary policy	Federal Reserve (Fed) policy concerning the money supply and the control of inflation in a country	38
9472463900	money supply	the total amount of currency (coin and paper money) and deposits in banks in a country	39
9472463901	expansionary monetary policy	when a country's central bank tries to increase the country's money supply and boost its economy by keeping interest rates low	40