1. Economics Flashcards #81-122 Unit 3 Macroeconomics

2. 81. Macroeconomics
Refers to large-scale economic issues such as overall economic growth, unemployment rate, inflation, and government policies.

3. 82. Money
Anything that is a medium of exchange, has a store of value, and is a unit of account.

4. 83. Medium of Exchange
Means for facilitating transactions.

5. 84. Unit of Account Creates standard measure for purchases.
A means for comparing the values of goods/services.

6. 85. Store of Value Relatively stable value (keeps its value)
Can be used now or later.
Convenient way to store wealth

7. 86. Economic Indicators
Factors that determine the general economic health of a nation.
These factors include: Gross Domestic Product (GDP), Consumer Price Index (CPI), aggregate supply and demand, and unemployment rate.

8. 87. Gross Domestic Product (GDP)
The value of all final goods and services produced by a country during a year.
GDP = C+I+G+Xn (Output expenditure model)
C = Consumer spending
I = Business Investments
G = Government Spending
Xn = Net Exports

9. 88. Inflation
A rise in CPI which shows an overall rise in prices. (dollar loses value)

10. 89. Consumer Price Index (CPI)
Measures inflation by determining how the cost of a standard group of consumer goods (or “market basket”) has changed over time.
VS.
2009
2016

11. 90. Real GDP The value of current GDP adjusted for inflation.
This is a more accurate view of a country’s productivity than looking at just current (nominal) GDP.

12. 91. Aggregate Demand and Aggregate Supply
The demand or supply for all goods and services in the economy at different price levels. (equals to GDP or output)

13. 92. Business Cycle
Measured by real GDP and has 4 phases (expansionary, peak, contractionary, trough)

14. 93. Expansionary Phase
Period of economic growth measure by a rise in real GDP

15. 94. Peak
When real GDP stops rising and is the height of economic expansion.

16. 95. Contraction
Following the peak there is a decline in real GDP (also called a recession)

17. 96. Trough
The lowest point of economic decline and when real GDP stops falling. (Also known as a depression)

18. 97. Recession
An extra long contraction usually measured by a decline in real GDP for two consecutive quarters (6 months)

19. 98. Depression
A severely prolonged contraction and recession.

20. 99. Labor Force
Employed + unemployed (people not working who are actively looking for work) +

21. 100. Types of Unemployment
Structural
Frictional
Cyclical
Seasonal

22. 101. Seasonal Unemployment
Unemployment due to a change in the seasons (snow ski instructor in the summer)

23. 102. Structural Unemployment
Unemployment resulting from people’s skills no longer matching up with the available jobs. “skills gap”. Technology changes the job to be done.
Remember Structural = Skills

24. 103. Frictional Unemployment
People are in transition and not taking the first job available (graduating college, moving, etc). Looking for a better job.
Frictional = Finding something better

25. 104. Cyclical Unemployment
Unemployment caused by a decline in the business cycle.
Cyclical = Business Cycle

26. 105. Full Employment
Level of unemployment when there is no cyclical unemployment. (4-6% unemployment)

27. 106. Underemployment
Working for jobs that people are not trained for. (Ex. College graduate digging ditches)

28. 107. Discouraged Workers
When people have given up looking for work. No longer part of the labor force.

29. 108. Budget Deficit
When the government spends (expenditures) more than it brings in (tax revenue). Yearly figure.

30. 109. National Debt
Government debt that has accumulated after operating for several years on a deficit.

31. 110. Federal Reserve System
(The FED) Our nation’s bank
Its main function is to control the money supply through monetary policy.

32. 111. FED’s 12 District Banks
12 district banks that serve the needs of the regions where they’re located.
Private or decentralized part of the FED.

33. 112. Board of Governors
The government part of the FED and the Federal Open Market Committee (FOMC).
7 members appointed by the President, approved by the Senate, and reside in Washington, DC.

34. 113. Federal Open Market Committee (FOMC)
Consists of 12 members:
the 7 members from the Board of Governors +
5 of the district bank presidents
Work to determine monetary policy.

35. 114. Monetary Policy
Tools used by the FED to stabilize the economy.

36. 115. Monetary Policy Tools Discount rate Reserve Requirements
Buying and selling of govt securities (bonds)

37. 116. Discount Rate
Interest rate the FED charges commercial banks for loans.

38. 117. Reserve Requirements
The percentage of a bank’s deposits that the banks have to keep in their vaults and can’t loan out.

39. 118. Contractionary Monetary Policy
Actions taken by the FED (Federal Reserve Bank) to slow the economy (GDP).
1. Raise Interest (Discount) rates.
2. Raise Reserve Requirements.
3. Sell Govt. securities (Bonds).

40. 119. Expansionary Monetary Policy
Actions taken by the FED to grow economy.
1. Lower discount rate
2. Lower Reserve Requirements
3. Buy govt. securities (Bonds)

41. 120. Fiscal Policy
Taxing and spending by the government to influence the economy.

42. 121. Contractionary Fiscal Policy
-Actions taken by the govt. to slow the economy
1. Raise taxes
2. Lower Government spending.

43. 122. Expansionary Fiscal Policy
Actions taken by the govt. to grow the economy.
1. Lower taxes
2. Raise govt. spending.