Macro Chapter 5
The unemployment rate equals
(labor force-employed)/labor force
If Congress increases government spending, it is using
fiscal policy
If the labor force is 500 and employment is 450, then the unemployment rate is
10% (500-450)/500
TRUE OR FALSE:Macroeconomics is concerned with the market price and equilibrium quantity of each good or service
FALSE
Which of the following is a CORRECT statement? A) Companies issue shares but don't issue bonds. B) The government issues both bonds and shares. C) Bondholders earn dividends but shareholders don't. D) Shareholders earn dividends but bondholders don't.
Shareholders earn dividends but bondholders dont
TRUE OR FALSE:Macroeconomic behavior is the sum of all the microeconomic decisions made by individual households and firms
TRUE
Deflation
a decrease in the overall price level
Circular Flow
a diagram showing the income received and payments made by each sector of the economy
Stagflation
a situation of both high inflation and unemployment
What is a topic studied in Macroeconomics?
aggregate behavior of households and industries
Recession
aggregate output declines. Conventionally when aggregate output declines for two consecutive quarters
In a business cycle, a peak represents the end of
an expansion
Inflation
an increase in overall price level
Transfer Payments
cash payments made by the government to people who do not supply goods, services, or labor in exchange for these payments. Ex: Social Security benefits, Welfare payments, and Veterans' Benefits
The concept of "market clearing" is adopted and defended by
classical economists
Business Cycle
cycle of short term ups and downs in the economy
Related to the Economics in Practice on p. 417: F. Scott Fitzgerald's The Great Gatsby is set in the "Roaring '20s." This decade in U.S. history was characterized by
economic expansion and low unemployment.
Shares of Stock
financial instruments that give to the holder a share in the firm's ownership and therefore the right to share in the firm's profits
Fiscal Policy
government policies concerning taxes and spending
The federal Reserve affecting the supply of money is known as
monetary policy
Contraction/Recession/Slump
period in the business cycle from a peak down to a trough during which output and employment fall
Expansion/Boom
period in the business cycle from a trough up to a peak which output and employment grow
Hyperinflation
period of rapid increases in the overall price level
Fine-Tuning
phrase used by Walter Heller to describe the governments role in regulating inflation and unemployment
According to Classical models, the level of employment is determined primarily by
prices and wages
Sticky Prices
prices that don't always adjust rapidly to maintain equality between the quantity supplied and quantity demanded
Depression
prolonged and deep recession
Corporate Bonds
promissory notes issued by firms when they borrow money
Treasury Bonds/Notes/Bills
promissory notes issued by the federal government when it borrows money
A household that spends less than it receives in income during a given period is
saving
The government implements fiscal policy when it changes
taxes and/or spending
Macroeconomic policies became more influenced by Keynes' theories starting with,
the Great Depression
Aggregate Behavior
the behavior of all households and firms
Unemployment Rate
the percentage of the labor force that is unemployed
Dividends
the portion of a firm's profits that the firm pays out each period to its shareholders
Monetary Policy
the tools used by the Federal Reserve to control the short-term interest rate
Stagflation occurs when the economy's inflation rate is high and
the unemployment rate is high
The major lesson of the circular flow diagram is that
total income in the economy must always equal total spending
In the circular flow diagram, the different payments made by firms to households include
wages and profits
