[MACRO] 01 - Introduction Flashcards
Definition: Macroeconomics
Deals with the economy as a whole. Macroeconomics focuses on the determinants of total national income, deals with aggregates such as aggregate consumption and investment, and looks at the overall level of prices instead of individual prices.
3 Economic Problems handled by Macroeconomics
1) Unemployment
2) Inflation
3) Output Growth
Definition: Aggregate Behaviour
The behaviour of all households and firms together
Definition: Sticky Prices
Prices that do not always adjust rapidly to maintain equality between quantity supplied and quantity demanded.
Definition: Stagflation
Occurs when the overall price level rises rapidly (inflation) during periods of recession or high and peristent unemployment (stagnation)
Definition: Inflation
An increase in the overall price level
Definition: Hyperinflation
A period of very rapid increases in the overall price level
Definition: Deflation
A decrease in the overall price level (mainly a theoretical concept)
Definition: Business Cycle
The cycle of short-term ups and downs in the economy
Definition: Aggregate Output
The total quantity of goods and services produced in an economy in a given period
Definition: Recession
A period during which aggregate output declines for two consecutive quarters.
Definition: Depression
A prolonged and deep recession.
3 Types of Government Policies that influence macroeconomics
1) Fiscal Policy
2) Monetary Policy
3) Growth or supply-side policies
Definition: Fiscal Policy
Gov. Policies concerning taxes and expenditures
Definition: Monetary Policy
Tools used by the Federal Reserve to control the quantity of money in the economy
Definition: Unemployment Rate
Number of unemployed adults/total labour force.
- Labour force only counts the individuals who are willing to work.
Definition: Structural Unemployment
Unemployment that is caused by changes in the structure of the economy
Definition: Critical Unemployment
Unemployment that is caused by a recessions or the business cycle.
Definition: Disinflation
Decrease in the overall inflation rate. The Inflation rate can still be positive, but disinflation occurs when that rate decreases.
4 Actors in the Macroeconomic World
1) Households
2) Firms
3) Government
4) Rest of the World
Definition: Transfer Payments
Cash payments made by the gov. to people who do not supply goods, services, or labour in exchange of these payments. They include Social Security benefits, veterans’ benefits, and welfare payments.
3 Markets in the Macroeconomic World
1) Goods-and-Services market
2) Labour market
3) Money (financial) market
Definition: Goods-and-Services Market
Here Firms supply to the goods-and-services market. Households, the gov. and firms demand from this market
Definition: Labor Market
Households supply the labour that firms and the gov. demand
Definition: Money Market
Households supply funds to this market in the expectation of earning income and also demand (borrow) funds from this market.
The gov., firms and the rest of the world also engage in borrowing and lending, coordinated by financial institutions
Definition: Corporate Bonds
Promissory notes issued by corporations when they borrow money
Definition: Expansion/Boom (Business Cycle)
The period in the business cycle from a trough up to a peak, during which output and employment rise.
Definition: Recession/Slump (Business Cycle)
The period in the business cycle from a peak down to a trough, during which output and employment fall.
