Macroeconomics

the study of how societies use limited resources to satisfy unlimited needs and wants

needs and wants are unlimited, but resources are limited

taking notice of the economy as a whole

Traditional (customary) poor countries-passed down through customs, command (planned) – government controlled, market (capitalistic) – no one is in control, consumers, mixed (US) – most countries

Way economy operates

What economy should be

place where goods and services are bought and sold

list of amounts that consumers are able and willing to purchase at each price

inverse relationship between price of a product and the quantity demanded

moving from one point on a demand schedule or curve to another point

a list that shows the amount that the sellers are willing and able to make available for sale at each price

direct relationship between price and quantity supplied

measures total amount of what is produced in a given year

decline in output for two or more quarters

severe reduction in total output accompanied by high unemployment lasting more than a year

the total amount of goods and services produced in a given period of time

total amount of all final goods and services bought each price level

total amount produced at each price level

total spending of final goods and services

the amount that businesses’ inventories are above/below their desired level

maximum level of output the economy can produce

increase in government spending to close a contractionary gap

actual level of output is below potential level

decrease in government spending to close an expansionary gap

deliberate changes in government spending to effect level of economic activity

government expenditures are larger than its revenue

government revenue is larger than its expenditures

must be a medium of exchange, unit of account, standard of deferred payment, function store value

assets that fed allows banks to use to back up deposits

the dollar amount the fed says banks must have in reserves

any reserves the banks has over required reserves

when the fed increases the money supply, which lowers the interest rate, which increases investment, aggregate demand, and output.

When the fed decreases the money supply, which increases interest rates, which in turn decreases investment, aggregate demand and output.