Principles of Economics chapter 6 Flashcards
What is a self-regulating economy
In a self-regulating economy, problems such as unemployment are resolved without government intervention, through the working of the invisible hand.
What is said according to Keynesian economics
According to Keynesian economics, economic slumps are caused by inadequate spending, and they can be mitigated by government intervention.
What does monetary policy use
Monetary policy uses changes in the quantity of money to alter interest rates and affect overall spending.
What does fiscal policy use
Fiscal policy uses changes in government spending and taxes to affect overall spending.
What are recessions
Recessions, or contractions, are periods of economic downturn when output and employment are falling.
What are expansions
Expansions, or recoveries, are periods of economic upturn when output and employment are rising.
What is the business cycle
The business cycle is the short-run alternation between recessions and expansions.
What is a business-cycle peak
The point at which the economy turns from expansion to recession is a business-cycle peak.
What is a business-cycle trough
The point at which the economy turns from recession to expansion is a business-cycle trough.
What is long-run economic growth
Long-run economic growth is the sustained upward trend in the economy’s output over time.
What is price stability
The economy has price stability when the overall level of prices changes slowly or not at all.
What is an open economy
An open economy is an economy that trades goods and services with other countries.
What is trade deficit and trade surplus
A country runs a trade deficit when the value of goods and services bought from foreigners is more than the value of goods and services it sells to them. It runs a trade surplus when the value of goods and services bought from foreigners is less than the value of the goods and services it sells to them.
