Chapter 20 - Introduction to Macroeconomics Flashcards Preview

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Flashcards in Chapter 20 - Introduction to Macroeconomics Deck (25):
1

microeconomics

Examines the functioning of individual industries and the behavior of individual decision-making units—firms and households.

2

macroeconomics

Deals with the economy as a whole. Macroeconomics focuses on the determinants of total national income, deals with aggregates such as aggregate consumption and investment, and looks at the overall
level of prices instead of individual prices.

3

aggregate behavior

The behavior of all households and firms together.

4

sticky prices

Prices that do not always adjust rapidly to maintain equality between quantity supplied and quantity demanded.

5

business cycle

The cycle of short-term ups and downs in the economy.

6

aggregate output

The total quantity of goods and services produced in an economy in a given period.

7

recession

A period during which aggregate output declines. Conventionally, a period in which aggregate output declines for two consecutive quarters.

8

depression

A prolonged and deep recession.

9

expansion or boom

The period in the business cycle from a trough up to a peak during which output and employment grow.

10

contraction, recession, or slump

The period in the business cycle from a peak down to a trough during which output and employment fall.

11

unemployment rate

The percentage of the labor force that is unemployed.

12

inflation

An increase in the overall price level.

13

hyperinflation

A period of very rapid increases in the overall price level.

14

deflation

A decrease in the overall price level.

15

circular flow

A diagram showing the income received and payments made by each sector of the economy.

16

transfer payments

Cash payments made by the government to people who do not supply goods, services, or labor in exchange for these payments. They include Social Security benefits, veterans’ benefits, and welfare payments.

17

Treasury bonds, notes, and bills

Promissory notes issued by the federal government when it borrows money.

18

corporate bonds

Promissory notes issued by firms when they borrow money.

19

shares of stock

Financial instruments that give to the holder a share in the firm’s ownership and therefore the right to share in the firm’s profits.

20

dividends

The portion of a firm’s profits that the firm pays out each period to its shareholders.

21

fiscal policy

Government policies concerning taxes and spending.

22

monetary policy

The tools used by the Federal Reserve to control the quantity of money, which in turn affects interest rates.

23

Great Depression

The period of severe economic contraction and high unemployment that began in 1929 and continued throughout the 1930s.

24

fine-tuning

The phrase used by Walter Heller to refer to the government’s role in regulating inflation and unemployment.

25

stagflation

A situation of both high inflation and high unemployment.