Krugman Textbook Chapter 6 Flashcards
Self-Regulating Economy
An economy that, through the help of the invisible hand, is able to work through its own issues, such as unemployment, and get back on its own feet without the need of government intervention.
Keynesian Economics
An inspired school of thought from John Maynard Keynes; the idea that a depressed economy is the result of inadequate spending, and that government intervention can help through monetary and fiscal policy.
Monetary Policy
Changes in the quantity of money in circulation designed to alter interest rates and affect the level of overall spending.
Fiscal Policy
Changes in government spending and taxes designed to affect overall spending.
Recession
A downturn in the economy when output and employment are falling.
Expansion
A upturn in the economy when output and employment are rising; a.k.a recovery.
Business Cycle
The short-run alternation between economic downturns (a.k.a recessions) and economic upturns (a.k.a expansions).
Business Cycle Peak
The point in time at which the economy shifts from expansion to recession.
Business Cycle Trough
The point in time at which the economy shifts for recession to expansion.
Long-Run Economic Growth
The sustained rise in the quantity of goods and services the economy produces.
Inflation
A rise in the overall level of prices.
Deflation
A fall in the overall level of prices.
Price Stability
A situation where the overall price of living is changing either slowly or not at all.
Open Economy
An economy that trades its goods and services with other countries.
Trade Deficit
When the value of goods and services bought from other countries is more than the value of goods and services sold to other countries.
