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26 terms

Macroeconomics Chapter 19

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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