Unit 3 Test Study Guide Flashcards
Systematic changes in real GDP market by alternating periods of expansion and connection
Business Cycle
Use of government spending and revenue collection measures to influence the economy.
Fiscal Policy
Sustained rise in the general level of prices of goods and services.
The purchasing power of the dollar decreases.
Inflation
Index used to measure price changes for a market basket of frequently used consumer items.
Consumer Price Index
Monetary value of all final goods, services, and structures produced within a country’s national borders during a one-year period.
Gross Domestic Product
Government payment to encourage or protect a certain economic activity.
Subsidy
Government spending and taxation policies suggest by John Maynard Keynesian to stimulate the economy.
Keynesian Economic Theory
Actions by the Federal Reserve System to expand or contact the money supply to affect the cost of availability of credit.
Monetary Policy
Helps to measure the health of a economy.
Unemployment Rate
Privately owned, publicly controlled, central bank of the United States.
Federal Reserve System
A tax percentage of income paid in tax, rates rises as level of income rises.
Progressive Tax
A tax in which percentage of income paid in tax i the same regardless of the level of income.
Proportional Tax
A tax where percentage of income paid in tax goes down as income rises.
Regressive Tax
How does the circular flow work? Especially the role of the consumer?
In a circular flow households and businesses exchange goods and services. Businesses buy good and services from consumers, and Households (consumers) buy goods and services from businesses (producers).
How to use a Production Possibilities Curve (PPC)?
Key points to remember when using a PPC:
Axis labels:
The x-axis and y-axis represent the quantities of the two goods being compared
Curve shape:
The curve is usually concave upwards, illustrating the concept of increasing opportunity cost - the more of one good you produce, the greater the amount of the other good you must give up to produce an additional unit.
Interpreting points on the curve:
On the curve: Represents full employment and efficient use of resources, meaning the economy is producing the maximum possible output with its current capabilities.
Inside the curve: Indicates inefficient use of resources, meaning the economy could produce more of both goods by allocating resources better.
Outside the curve: Represents an unattainable production level with current resources.
