Government policy that influences the quantity of goods and services that a country imports or exports.
Trade Policy
A large and sudden reduction in the demand for assets located in a country.
Capital Flight
A period of declining real incomes and rising unemployment.
Recession
A severe recession.
Depression
Model that most economists use to explain short-run fluctuations in economic activity around its long-run trend.
Model of Aggregate Demand and Aggregate Supply
A curve that shows the quantity of goods and services that households, firms, the government, and customers abroad want to buy at each price level.
Aggregate-demand Curve
A curve that shows the quantity of goods and services that firms choose to produce and sell at each price level.
Aggregate-supply Curve
Production of goods and services that an economy achieves in the long run when unemployment is at its normal rate.
Natural Rate of Output
A period of falling output and rising prices.
Stagflation
Keynes's theory that interest rate adjusts to bring money supply and money demand into balance.
Theory of Liquidity Preference
The setting of the level of government spending and taxation by government policymakers.
Fiscal Policy
The additional shifts in aggregate demand that result when expansionary fiscal policy increases income and thereby increases consumer spending.
Multiplier Effect
The offset in aggregate demand that results when expansionary fiscal policy raises the interest rate and thereby reduces investment spending.
Crowding-Out Effect
Changes in fiscal policy that stimulate aggregate demand when the economy goes into a recession without policymakers having to take any deliberate action.