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econ test #3
Terms in this set (21)
the study of the national economy
Define gross domestic product
dollar value of all final goods & services produced within the country's borders in a year
Explain the expenditure approach to calculating GDP.
GDP = C + I + G + Xn
Define real GDP.
dollar value of all final goods & services produced within the country's borders in year after taking out the effects of inflation
Define frictional, seasonal, structural, and cyclical unemployment.
Frictional — temporary unemployment as a result of firings or voluntary searches for new jobs
Seasonal — loss of job because of change in season or weather
Structural — when economic progress, change in consumer tastes
Cyclical — unemployment associated with RECESSION
Define inflation and deflation.
inflation - general increase in overall price levels
deflation - general decrease in overall price levels
Define and explain the three causes of inflation (demand-pull, cost-push, and excessive monetary growth).
Excessive monetary growth - when the money supply grows faster than real GDP
demand-pull inflation — prices rise as a result of excessive business and consumer demand
cost-push inflation — increased cost of productive resources pushes prices up
Define consumer price index.
government measure of the change in price over time of a specific group of goods & services used by the average household
Define business cycle.
ups and downs in economic activity
List and define the phases of the business cycle (expansion, peak, contraction/recession, trough).
expansion- increased GDP
peak-Last three months of expansion
trough-Last three months of contraction
"Define aggregate demand.
is the total demand for final goods and services in an economy at a given time
List and explain the determinants of aggregate demand.
Changes in any of the aggregate demand determinants cause the aggregate demand curve to shift.
Define aggregate supply.
is the total supply of goods and services that firms in a national economy plan on selling during a specific time period
Define fiscal policy.
is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy.
a current medium of exchange in the form of coins and banknotes; coins and banknotes collectively.
Define the three types of money (commodity, fiat, and representative).
commodity-Commodity money consists of objects that have value in themselves as well as value in their use as money.
fiat-inconvertible paper money made legal tender by a government decree.
representative-Any type of money that has face value greater than its value as material substance.
Define the Federal Reserve System.
It was created by the Congress to provide the nation with a safer, more flexible, and more stable monetary and financial system
Name the chairman of the Federal Reserve.
List the number of Federal Reserve districts.
List the responsibilities of the Fed.
serving as a banking and fiscal agent for the United States government; and supplying payments services to the public through depository institutions like banks, credit
Define monetary policy.
is the process by which the monetary authority of a country controls the supply of money,
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