Chapter 2 Flashcards

1
Q

paradox of thrift

A

When families ans businesses are woried about the possibility of economic had times, they prepare by cutting their spending. This reduction depresses the economy

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2
Q

Self-regulating economy

A

Problems such as unemployment are resolved without government intervention, through the working of the invisible hand.

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3
Q

Keynesian economics

A

Economic slumps are caused by inadequate spending, and they can be mitigated by government intervention

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4
Q

Monetary policy

A

Uses changes in the quantity of money to alter interest rates and affect overall spending

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5
Q

Fiscal policy

A

Uses changes in government spending and taxes to affect overall spending

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6
Q

Recessions

A

Periods of economic downturn when output and employment are falling

“contractions”

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7
Q

Expansions

A

Periods of economic upturn when output and employment are rising

“recoveries”

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8
Q

Business cycle

A

The short-run alternation between recesisions and expansions

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9
Q

Business-cycle peak

A

The point at which the economy turns from expansion to recession

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10
Q

Business-cycle trough

A

The point at which the economy turns from recession to expansion

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11
Q
A
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12
Q

Indicator os conditions in the labor market

A

Unemployment rate

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13
Q

Long-run economic growth

A

The sustained upward trend in the economy’s out put over time

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14
Q

Inflation

A

A rising overall level of prices

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15
Q

deflation

A

A falling overall level of prices

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16
Q

Money supply

A

The total quantity of assets that can be readily used to make purchases

overall prices in the long run determined by changes in money supply

17
Q

Hyperinflation

A

In which prices rise by thousands or hundreds of thousands of percent

18
Q

Price stability

A

When the overall level of prices changes slowly or not at all

19
Q
A
20
Q

Open economy

A

An economy that trades goods and services with other countries

21
Q

Trade deficit

A

When the value of goods and services bought from foreigners is more than the value of goods and services it sells to them

imports > exports

22
Q

Trade surplus

A

When value of goods and services bought from foreigners is less than the value of the goods and services it sells to them

exports > imports

23
Q

Long-run growth per capita

A

A sustained upward trend output per person is the key to higher wages and a rising standard of living