Unit 3 Macroeconomic
Recession
A slowdown in a nation's economy
Steady economic growth
An economy can reach a steady state after a period of growth or after a period of downsizing or degrowth.
unanticipated inflation
An increase of the price level (inflation) at a rate greater than expected.
12 districts of the fed
Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco.
Real GDP
GDP adjusted for inflation
fiscal policy
Government policy that attempts to manage the economy by controlling taxing and spending.
Functions of Money
Medium of exchange, store of value, unit of account
Reserve Requirement
The amount of money banks are required to keep in their vault on a daily basis
open market operations
The buying and selling of government securities to alter the supply of money
discount rate
The interest rate on the loans that the Fed makes to banks
macroeconomic goals
The three primary macroeconomic policy goals are economic growth, low unemployment and low inflation.
Seasonal unemployment
The unemployment that arises because of seasonal patterns
Inflation
a general increase in prices and fall in the purchasing value of money.
Contraction
a period of economic decline marked by falling real GDP
Depression
a period of low economic activity and rising unemployment
budget deficit
a shortfall of tax revenue from government spending
budget surplus
an excess of tax revenue over government spending
consumer spending
an exchange of money for goods and services.
Consumer Price Index (CPI)
an index of the variation in prices paid by typical consumers for retail goods and other items.
store of value
an item that people can use to transfer purchasing power from the present to the future
medium of exchange
anything that is used to determine value during the exchange of goods and services
Tools of Monetary Policy
discount rate, reserve requirements, and open market operations.
Stages of the business cycle
expansion, peak, contraction, and trough.
Types of unemployment
frictional, structural, cyclical, seasonal
Peak
highest point between the end of an economic expansion and the start of a contraction in a business cycle.
Government Spending
includes spending by all levels of government on final goods and services
Federal Open Market Committee (FOMC)
monetary policymaking body of the Federal Reserve System.
investment
n. the act of putting money, effort, time, etc. into something to make a profit
Federal reserves dual mandate
operated under a mandate from Congress to "promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates
Interest on reserves
rate at which the Federal Reserve Banks pay interest on reserve balances, which are balances held by DIs at their local Reserve Banks.
Federal Reserve System
the central bank of the United States
Stable prices
the general price level in an economy does not change much over time.
Full employment
the level of employment reached when there is no cyclical unemployment
Trough
the lowest part of a transverse wave
unemployment rate
the percentage of the labor force that is unemployed
monetary policy
the setting of the money supply by policymakers in the central bank
Board of Governors
the seven-member board that oversees the Federal Reserve System
Aggregate Demand
the sum of all the demand in the economy
Aggregate Supply
the supply of all goods and services by all producers in the economy
net exports
the value of a country's exports minus the value of its imports
unit of account
the yardstick people use to post prices and record debts
GDP (Gross Domestic Product)
total value of goods produced and services provided in a country during one year.
frictional unemployment
unemployment that occurs when people take time to find a job
structural unemployment
unemployment that occurs when workers' skills do not match the jobs that are available
Cyclical Unemployment
unemployment that rises during economic downturns and falls when the economy improves
Recovery/Expansion
when the economy moves from a trough to a peak.
