Macroeconomics Chapter 19

26 terms by lostinagloe

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Economy

The structure of economic activity in a community, a region, a group of countries, or the world

Gross Domestic Product (GDP)

The market value of all final goods and services produced in the nation during a particular period, usually a year

Gross world product

The market value of all final goods and services produced in the world during a particular period, usually a year

Flow variable

A variable that measures something over time, such as your income per week

Stock variable

A variable that measures something at a particular point in time, such as the amount of money you have with you right now

Mercantilism

The incorrect theory that a nation's economic objective should be to accumulate precious metals in the public treasury; this theory prompted trade barriers to cut imports, but other countries retaliated, reducing trade and the gains from specialization

Economic fluctuations

The rise and fall of economic activity relative to the long-term growth trend of the economy; also called business cycles

Expansion

A period during which the economy's output increases

Contraction

A period during which the economy's output declines

Depression

A sharp reduction in an economy's total output accompanied by high unemployment lasting more than a year

Recession

A sustained decline in the economy's total output lasting at least two consecutive quarters, or six months; an economic contraction

Inflation

An increase in the economy's average price level

Coincident economic indicators

Variables that reflect peaks and troughs in economic activity as they occur; examples include employment, personal income, and industrial production

Lagging economic indicators

Variables that follow, or trail, changes in overall economic activity; examples include the interest rate and the average duration of unemployment

Aggregate output

A composite measure of all final goods and services produced in an economy during a given period; real GDP

Aggregate demand

The relationship between the economy's price level and aggregate output demanded, with other things constant

Price level

A composite measure reflecting the prices of all goods and services in the economy relative to prices in a base year

Real gross domestic product (real GDP)

The economy's aggregate output measured in dollars of constant purchasing power

Aggregate demand curve

A curve representing the relationship between the economy's price level and real GDP demanded per period, with other things constant

Aggregate supply curve

A curve representing the relationship between the economy's price level and real GDP supplied per period, other things constant

Federal budget deficit

A flow variable measuring the amount by which federal government outlays exceed federal government revenues in a particular period, usually a year

Demand-side economics

Macroeconomic policy that focuses on shifting the aggregate demand curve as a way of promoting full employment and price stability

Stagflation

A contraction, or stagnation, of a nation's output accompanied by inflation in the price level

Supply-side economics

Macroeconomic policy that focuses on a rightward shift of the aggregate supply curve through tax cuts or other changes to increase production incentives

Federal debt

A stock variable that measures the net accumulation of annual federal deficits

Real GDP per capita

Real GDP divided by population; the best measure of an economy's standard of living

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