BA101 (Week 2) Chapter 3 Flashcards
Recession
Two consecutive quarters of negative economic growth.
Economic Growth
Change in the general level of economic activity.
Aggregate expenditures
Total amount of expenditure in economy (spending by consumers)
Gross Domestic Product
Total market value of all final products and services produced in U.S.
4 types of unemployment
- Frictional - people who are between jobs (unemployment is temporary)
- Seasonal
- Cyclical - people who are unemployed because of poor economic conditions.
- Structural - they do not ave adequate skills.
Inflation
Increase in general level of prices of products and services over period of time.
Types of Inflations
1 Cost-Push: higher prices charged by firms are caused higher cost. (Ex: coke, delivery, oil)
2. Demand-pull: price of products and services are pulled up because of strong consumer demand.
Law of Demand
Inverse relationship between price and quantity.
Law of Supply
Direct relationship between price and quantity.
Law of Equilibrium
Balance quantity of product supplied with quantity demand.
Elastic Demand
Demand is highly responsive to price change (flatter curve)
Inelastic Demand
Demand is not responsive to price change.
Indicators
- Inflation
- Unemployment Rate
- GDP
- (lead) Interest Rates
- (best) stock market.
Interest Rates
Determine the cost of borrowing money.
Money Supply
Demand deposits (checking accounts)
Federal Reserve System
Central bank of the United States
Monetary Policy
Decisions on the money supply level in the U.S.
Consumer Price Index
Measure of average of the price paid by urban consumers for a fixed market basic of consumers goods and services
Federal Open Market Committee
12 voting members that decide the monetary policy, predict U.S economy.
Fiscal Policy
Decisions on how fed government should set tax rates and spend money.
Excise Taxes
Tax imposed by federal government on specific items.
Federal budget deficit
Situation amount of fed gov spending exceeds the amount of fed taxes and other income.