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Flashcards in Chapter 2 Deck (23):
1

paradox of thrift

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

2

Self-regulating economy

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

3

Keynesian economics

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

4

Monetary policy

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

5

Fiscal policy

Uses changes in government spending and taxes to affect overall spending

6

Recessions

Periods of economic downturn when output and employment are falling

"contractions"

7

Expansions

Periods of economic upturn when output and employment are rising

"recoveries"

8

Business cycle

The short-run alternation between recesisions and expansions

9

Business-cycle peak

The point at which the economy turns from expansion to recession

10

Business-cycle trough

The point at which the economy turns from recession to expansion 

11

12

Indicator os conditions in the labor market

Unemployment rate

13

Long-run economic growth

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

14

Inflation

A rising overall level of prices

15

deflation

A falling overall level of prices

16

Money supply

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

Hyperinflation

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

18

Price stability

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

19

20

Open economy

An economy that trades goods and services with other countries

21

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

imports > exports

22

Trade surplus

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

Long-run growth per capita

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