Macro Definitions Flashcards
Aggregate Demand
The total value of goods and services demanded by different groups at a given price level in a nation
National Income
A measure of the total economic activity that takes place within a nation
Consumption
The total expenditure by households when they purchase goods and services
Circular flow of income
The exchanges that take place when goods and services or factors or production are sold
GDP
The total value of all goods and services produced in an economy in a given period of time
Recession
Negative economic growth occurring over two or more quarters
The Money market
A model showing the total supply and demand for money in a nation
Monetary policy
The manipulation of interest rates and money supply to influence the level of AD in a country
Infrastructure
The capital stock of a country that facilitates economic growth - usually provided by government
Equity
Refers to fairness- where all individuals in society have a fair chance at achieving economic success
Equality
Minimizing the disparities in income and wealth among a nation’s households
(Economic) Efficiency
A level of performance that uses the least amount of resources to achieve highest amount of output
Absolute poverty
People earning below internationally defined levels of income i.e. $1.90
Relative poverty
Refers to low levels of income that is country-specific - relative the average level of income in that country
Keynesian Multiplier Effect
Any change in government spending will have a larger ultimate effect on the nation’s GDP as the resulting change in household income leads to further changes in consumption and investment in the economy.
Economic Growth
An increase in real output over time, measured by changes in real GDP
Unemployment
The condition of someone of working age who is willing and able to work, actively seeking employment, but unable to find a job
Inflation
A sustained increase in the average price level of goods and services in a nation
Demand-pull inflation
Inflation caused by an increase in AD in an economy
Cost-push inflation
Inflation caused by an increase in the costs of production in an economy
Demand-deficient deflation
Result of fall in demand - Bad
Supply-side deflation
Result of increase in productivity and lower costs- Good
Productivity
Amount of output per unit of input
Business confidence
Related to the expectations of businesses about the future of economic conditions and affects the level of investment
Inflationary gap
Situation where the economy is at a level of output greater than the full employment level of output/above potential output
Investment
Expenditure/spending by firms on capital
Privatization
The government sells state-owned enterprises to the private sector
Budget deficit
When government spending exceeds government revenue
Deflationary gap
Situation where the economy is at a level of output lower than the full employment level output/ below potential output
Rate of inflation
The rate at which prices increase over time, causing the value of money to fall
