EOCa Review Macroeconomics

Inflation

A general and progressive increase in prices

Real GDP

GDP adjusted for inflation

Business Cycles

General swings in business activity, resulting in expanding or contracting activity during different phases of the cycle.

Fiscal Policy

Government use of taxing and spending to address economic problems and situations

Current GDP

Gross Domestic Product measured in current prices, not adjusted for inflation

Budget Deficits

The amount by which a government's spending in a given fiscal year exceeds its revenue.

National Debt

The amount of money a national government owes to other governments or its people

Federal Reserve

The country's central banking system, which is responsible for the nation's monetary policy by regulating the supply of money and interest rates

Gross Domestic Product

The total value of goods and services produced within the borders of a country during a specific time period, usually one year.

Nominal GDP

a measure of a country's economic output (GDP) valued in current dollars; nominal GDP does not reflect the effects of inflation

poverty guidelines

administrative guidelines used to determine eligibility for certain federal programs

Public Debt

all of the money borrowed by the government and not yet repaid, plus the accrued interest on that money; also called the national debt or federal debt

poverty threshold

annual dollar income used to determine the number of people in poverty

entitlements

broad social program that uses established eligibility requirements to provide health, nutritional, or income supplements to individuals

Monetary Policy

changes in the supply of money and availability of credit to promote stable economy and keep inflation low

recession

decline in real GDP lasting at least two quarters

deflation

decrease in the general level of prices for goods and services

supply-side policies

economic policies designed to stimulate the economy by increasing production

demand-pull inflation

explanation that prices rise because all sectors of the economy try to buy more goods and services than the economy can produce

cost-push inflation

explanation that rising input costs, especially energy and organized labor, drive up the prices of products

Medicare

federal health-care program for senior citizens, regardless of income

Keynesian economics

government spending and taxation policies suggested by John Maynard Keynes to stimulate the economy

Lorenz Curve

graph showing how the actual distribution of income differs from an equal distribution

GDP per capita

gross domestic product on a per person basis; can be expressed in current or constant dollars

aggregate supply curve

hypothetical curve showing different levels of real GDP that would be produced at various price levels

aggregate demand curve

hypothetical curve showing different levels of real GDP that would be purchased at various price levels

Medicaid

joint federal-state medical insurance program for low-income people

macroeconomic equilibrium

level of real GDP consistent with a given price level and marked by the intersection of aggregate supply and aggregate demand

output-expenditure model

macroeconomic model describing aggregate demand by the consumer, investment, government, and foreign sectors

multiplier

magnified change in overall spending caused by a change in investment spending

econometric model

mathematical expression used to describe how the economy is expected to perform in the future

civilian labor force

non-institutionalized part of the population, aged 16 and over, either working or looking for a job

Employment

noninstitutionalized part of the population, aged 16 and over, either working

Unemployment

noninstitutionalized part of the population, aged 16 and over, looking for a job

expansion

period of uninterrupted growth of real GDP

disposable personal income (DPI)

personal income less individual income taxes

trough

point in time when real GDP stops declining and begins to expand

peak

point in time when real GDP stops expanding and begins to decline

wage-price controls

policies and regulations making it illegal for firms to give raises or raise prices without government permission

accelerator

program that automatically provides benefits to offset a change in people's incomes

deregulation

relaxation or removal of government regulations on business activities

monetarism

school of thought stressing the importance of stable monetary growth to control inflation and stimulate long-term economic growth

consumer price index (CPI)

series used to measure price changes for a representative sample of frequently used consumer items

Economic Growth

steady growth in the productive capacity of the economy (and so a growth of national income)

negative income tax

tax system that would make cash payments to individuals with incomes below certain levels

Aggregate Supply

the total amount of goods and services in the economy available at all possible price levels

Aggregate Demand

the total value of all goods and services demanded at different price levels

structural unemployment

unemployment caused by a fundamental change in the economy that reduces the demand for some workers

cyclical unemployment

unemployment directly related to swings in the business cycle

frictional unemployment

unemployment involving workers changing jobs or waiting to go to new ones

base year

year serving as point of comparison for other years in a price index or other statistical measure