Chapter 6 Flashcards
Macroeconomics
examines performance and behaviour of economy as a whole,
microeconomics
concerned with decision making by individual consumer,
paradox of thrift
when consumers are worried about the future, they cut spendings and save. This reduction in spending depresses the economy
Prior to great depression economy was thought as
self regulating
self regulating economy
economy goes back to eqbm in long run by itself with no gov aid
Keynesian economics
slumps are caused by inadequate spending and can be corrected by government intervention
Government intervensions
monetary policy, fiscal policy
Monetary policy
uses changes in the quantity of money to alter interest rates
fiscal policy
uses changes in government spending and taxes
recession
economic downturn, output and employment are falling
expansion
economic upturn, output and employment are rising
business cycles
alternation between recession and expansion
business cycle troughs
economy turns from recession to expansion
business cycle peaks
economy turns from expansion to recession
inflation and cause when does it rise and fall
rise in overall level of prices, people spend, increase during expansion and decrease during recession
