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-increases in economic growth should enable more of everything to be produced
-increases possibility of providing goods for all
-more consumer goods, etc. could be equated with an increase in living standards
-wealth generated may eventually 'trickle down' to those who are poor by means of income distribution - taxes and benefits, etc.
BENEFITS
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-comes from the Ancient Greek Word "oikos" means house and "nomos" means custom or law
ECONOMICS
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-is the study of the use of scarce resources to satisfy unlimited human wants and needs
ECONOMICS
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-it deals on scarcity of resources on how a producer makes a best quality product with the use of limited raw materials
ECONOMICS
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-the study of the economy as a whole
MACROECONOMICS
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-examines the functioning of individual industries and the behavior of individual decision making units - firms and households.
MICROECONOMICS
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-focuses on the determinants of total national income, deals with aggregates such as aggregate consumption and investment, and looks at the overall level of prices instead of individual prices
MACROECONOMICS
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-the behavior of all households and firms together
AGGREGATE BEHAVIOR
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-prices that do not always adjust rapidly to maintain equality between quantity supplied and quantity demanded
STICKY PRICES
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Three of the major concerns of macroeconomics are:
- output growth
- unemployment
- inflation and deflation
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The main measure of how an economy is doing is:
- aggregate output
- aggregate employment
- aggregate price level
- growth rate of the population
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-the cycle of short-term ups and downs in the economy
BUSINESS CYCLE
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-the total quantity of goods and services produced in an economy in a given period
AGGREGATE OUTPUT
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-a period during which aggregate output declines for two consecutive quarters
RECESSION
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-a prolonged and deep recession
DEPRESSION
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-the period in the business cycle from a trough up to a peak during which output and employment grow
EXPANSION OR BOOM
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-the period in the business cycle from a peak down to a trough during which output and employment fall
CONTRACTION, RECESSION, OR SLUMP
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-the percentage of the labor force that is unemployed
UNEMPLOYMENT RATE
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-an increase in the overall price level
INFLATION
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-a period of very rapid increase in the overall price level
HYPERINFLATION
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-a decrease in the overall price level
DEFLATION
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Macroeconomics focuses on four broad groups:
- households
- firms
- the government
- the rest of the world
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-a diagram showing the income received and payments made by each sector of the economy
CIRCULAR FLOW
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-cash payments made by the government to people who do not supply goods, services, or labor in exchange for these payments
-they include Social Security benefits, veterans' benefits, and welfare payments
TRANSFER PAYMENTS
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Three Market Arenas
- the goods-and-services market
- the labor market
- the money (financial) market
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Firms supply to the goods-and-services market. households, the government, and firms demand from this market.
GOODS-AND-SERVICES MARKET
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In market, households supply labor and firms and the government demand labor.
LABOR MARKET
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Households supply funds to this market in the expectation of earning income in the form of dividends on stocks and interest on bonds
MONEY MARKET
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"Output Growth" terms
- business cycle
- aggregate output
- recession
- depression
- expansion or boom
- contraction, recession or boom
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"Money Market" terms
- treasury bonds, notes, and bills
- corporate bonds
- shares of stock
- dividends
- fiscal policy
- monetary policy
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-promissory notes issued by the federal government when it borrows money
TREASURY BONDS, NOTES, AND BILLS
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-promissory notes issued by firms when they borrow money
CORPORATE BONDS
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-financial instruments that give to the holder a share in the firm's ownership and therefore the right to share in the firm's profits
SHARES OF STOCK
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-the portion of the firm's profits that the firms pay out each period to its shareholders
DIVIDENDS
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The Role of the Government in the Macroeconomy
- fiscal policy
- monetary policy
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-government policies concerning taxes ans dpending
FISCAL POLICY
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-the tools used by the Federal Reserve to control the quantity of money, which in turn affects interest rates
MONETARY POLICY
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-the period of severe economic contraction and high unemployment that began in 1929 and continued throughout the 1930s
GREAT DEPRESSION
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-the phrase used by Walter Heller to refer to the government's role in regulating inflation and unemployment
FINE-TUNING
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-a situation of both high inflation and high unemployment
STAGFLATION
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