AI Notes Flashcards
What is macroeconomics?
The branch of economics that studies the behavior and performance of an economy as a whole.
True or False: Macroeconomics only focuses on individual markets.
False
What does GDP stand for?
Gross Domestic Product
Fill in the blank: The __________ is the total value of all goods and services produced within a country in a given period.
GDP
What is the difference between nominal GDP and real GDP?
Nominal GDP is measured at current market prices, while real GDP is adjusted for inflation.
What is inflation?
The rate at which the general level of prices for goods and services is rising.
True or False: A high inflation rate can erode purchasing power.
True
What is unemployment?
The situation when individuals who are capable of working are unable to find a job.
What does the term ‘business cycle’ refer to?
The fluctuations in economic activity that an economy experiences over a period of time.
What are the four phases of the business cycle?
Expansion, peak, contraction, and trough.
Fill in the blank: __________ is the sustained increase in the general price level of goods and services in an economy.
inflation
What is fiscal policy?
Government policy that uses taxation and spending to influence the economy.
What is monetary policy?
The process by which the central bank manages the money supply and interest rates.
What is a budget deficit?
A situation where government expenditures exceed its revenues.
What is a budget surplus?
A situation where government revenues exceed its expenditures.
What does the term ‘aggregate demand’ refer to?
The total demand for all goods and services in an economy at a given overall price level.
What does the term ‘aggregate supply’ refer to?
The total supply of goods and services that firms in an economy plan to sell during a specific time period.
Fill in the blank: The __________ is the total amount of money available in an economy at a particular time.
money supply
What is the role of the central bank?
To manage a nation’s monetary policy and regulate its banking system.
What is a recession?
A significant decline in economic activity spread across the economy lasting more than a few months.
True or False: A recession is characterized by falling GDP.
True
What is the consumer price index (CPI)?
A measure that examines the weighted average of prices of a basket of consumer goods and services.
What does the term ‘monetary inflation’ mean?
An increase in the money supply that leads to a decrease in the purchasing power of money.
What is a trade balance?
The difference between the value of a country’s exports and imports.
What is a trade deficit?
A situation where a country’s imports exceed its exports.
What is a trade surplus?
A situation where a country’s exports exceed its imports.
Fill in the blank: The __________ is the interest rate at which banks lend to each other overnight.
federal funds rate
What is the purpose of economic indicators?
To provide information about the overall economic performance and trends.
What are leading indicators?
Economic indicators that tend to change before the economy as a whole changes.
What are lagging indicators?
Economic indicators that tend to change after the economy has already begun to follow a particular pattern.
What is the significance of the unemployment rate?
It measures the percentage of the total workforce that is unemployed and actively seeking employment.
True or False: A high unemployment rate is generally seen as a sign of a healthy economy.
False
What is a fiscal stimulus?
Increased government spending and/or tax cuts aimed at boosting economic activity.
What is an economic contraction?
A decline in national output as measured by GDP.
Fill in the blank: __________ is the phenomenon where increased government spending leads to a reduction in private sector spending.
Crowding out
What is the function of the International Monetary Fund (IMF)?
To promote international monetary cooperation and financial stability.
What is the significance of exchange rates?
They determine how much one currency is worth in terms of another currency.
What is the balance of payments?
A record of all economic transactions between residents of a country and the rest of the world.
What does ‘stagflation’ refer to?
A situation characterized by stagnant economic growth, high unemployment, and high inflation.
What is the Phillips Curve?
A concept that illustrates the inverse relationship between inflation and unemployment.
