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Ib Economics > Macroeconomics > Flashcards

Macroeconomics Flashcards

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1
Q

What is National Income?

A

The value of all goods and services produced in a country within a certain time period.

National Income is a key indicator of economic performance.

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2
Q

What does the Output Method measure?

A

Measures national income by calculating the value of all finished goods and services produced in the country’s economy in a year.

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3
Q

What is the Income Method?

A

Measures the national income by calculating the sum of wages, rent, interest, and profits in a year.

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4
Q

Define the Expenditure Method.

A

Measures the national income by calculating the total amount of expenditure in the economy in a year.

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5
Q

What is Gross Domestic Product (GDP)?

A

The value of a country’s output of finished goods and services in a year.

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6
Q

What does Gross National Income (GNI) include?

A

The value of a country’s output of finished goods and services in a year, plus incomes from abroad.

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7
Q

What is Real GDP/GNI?

A

[GDP/GNI], adjusted for inflation by using constant prices.

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8
Q

Define Real GDP/GNI Per Capita at Purchasing Power Parity.

A

[Real GDP/GNI], adjusted for the cost of living in countries.

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9
Q

What is the Business Cycle?

A

A model that describes both the short and long term trends in economic activity over time.

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10
Q

What does Aggregate Demand represent?

A

The total value of all goods and services consumers are willing and able to purchase in an economy per year.

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11
Q

Define Aggregate Supply.

A

The total value of all goods and services producers are willing and able to sell in an economy per year.

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12
Q

What is an Inflationary Gap?

A

Exists when an economy’s real GDP exceeds its potential long-run full employment output.

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13
Q

What is a Deflationary Gap?

A

Exists when an economy’s real GDP is below its potential long-run full employment output.

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14
Q

What does Full Employment mean?

A

Exists when an economy is at its natural rate of unemployment, and the economy is operating at its full capacity.

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15
Q

What is the Natural Rate of Unemployment?

A

The level of employment at when the economy is operating at full employment, consisting of seasonal, frictional, and structural unemployment.

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16
Q

What is Economic Growth?

A

A sustained increase in a country’s real GDP over time.

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17
Q

Define Actual Output.

A

The current level of real GDP in an economy.

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18
Q

What is Potential Output?

A

The possible level of real GDP to reach in an economy.

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19
Q

What is Unemployment?

A

The issue when people willing and able to work are unable to find jobs.

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20
Q

Define Labor Force.

A

All people of working age who are either employed or willing and able to work.

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21
Q

What is Hidden Unemployment?

A

People who classify as unemployed but are not included in official unemployment records.

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22
Q

Define Underemployment.

A

The issue when people in the labor force are unable to find enough work.

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23
Q

What is Cyclical Unemployment?

A

Unemployment caused by a lack of demand for goods and services.

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24
Q

What causes Structural Unemployment?

A

Unemployment caused by technical mismatches between worker abilities and job requirements.

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25
What is Seasonal Unemployment?
Unemployment caused by periodical changes in the demand for labor during the year.
26
Define Frictional Unemployment.
Unemployment caused by temporarily jobless people actively searching for new jobs.
27
What is Inflation?
A sustained rise in the general price level of an economy over time.
28
Define Deflation.
A sustained decrease in the general price level of an economy over time.
29
What is Disinflation?
A fall in the rate of inflation.
30
What does the Consumer Price Index measure?
A weighted average of prices of typical household goods and services.
31
What is Cost-Push Inflation?
Inflation caused by higher costs of production, which decreases aggregate supply, increasing the general price level.
32
What is Demand-Pull Inflation?
Inflation caused by higher aggregate demand for goods and services, increasing the general price level.
33
Define Government/National Debt.
The sum of all debt accumulated and owed by the government.
34
What are Debt Servicing Costs?
The expenses of the government repaying the accumulated debt.
35
What is a Credit Rating?
A measure of a borrower's ability to repay loans.
36
What is Stagflation?
Occurs when there is rising inflation but falling real GDP.
37
What is Equity?
Refers to economic fairness, where people working harder will earn higher salaries.
38
Define Income Inequality.
The issue of income being unequally distributed in an economy.
39
What is Wealth Inequality?
The issue of assets being unequally distributed in an economy.
40
What is the Gini Coefficient?
A measure of either wealth or income inequality in an economy, with values ranging from 0 to 1.
41
Define Absolute Poverty.
Deprivation of basic human needs such as food, shelter, and sanitation.
42
What is Relative Poverty?
The issue of households being unable to afford the standard of living in an economy.
43
What is Human Capital?
The valued accumulation of skill knowledge, and experience of the labor force.
44
What are Progressive Taxes?
Taxes that charge an increasing percentage as incomes increase.
45
Define Proportional Taxes.
Taxes that charge a constant percentage at every income level.
46
What are Regressive Taxes?
Taxes that charge a decreasing percentage as incomes increase.
47
What is the Marginal Tax Rate?
The tax percentage paid on the last dollar of an income.
48
What are Direct Taxes?
Taxes imposed on income, rather than expenditure.
49
Define Indirect Taxes.
Taxes imposed on expenditure, rather than income.
50
What are Transfer Payments?
A sum of money from the government to households or firms with no goods or services exchanged in the return.
51
What is Universal Basic Income?
A guaranteed and unconditional minimum income guaranteed by the government.
52
Define Minimum Wages.
The lowest salary firms are allowed to pay their workers in an economy, determined by the government.
53
What is Monetary Policy?
The use of interest rates and the money supply to influence the level of economic activity and order to achieve macroeconomic objectives.
54
What are Interest Rates?
The cost of borrowing money.
55
What is the Real Interest Rate?
The cost of borrowing money, adjusted for current inflation.
56
Define Money Supply.
The total amount of money circulating in an economy.
57
What is Money Creation?
The process in which commercial banks create credit from deposits and loans.
58
What are Open Market Operations?
The buying and selling of government bonds by the central bank.
59
What are Minimum Reserve Requirements?
The lowest amount of customer deposits commercial banks are obliged to keep in the bank.
60
What is the Minimum Lending Rate?
The interest rate charged by the central bank when commercial banks borrow from it.
61
What is Quantitative Easing?
The buying and selling of corporate bonds by the central bank, thereby injecting money into the economy.
62
What is Money Demand?
The demand of households and firms to hold money for current spending, rather than saving, in the economy.
63
What is Fiscal Policy?
The use of taxation and government expenditure policies to influence the level of economic activity and achieve macroeconomic objectives.
64
What is Current Expenditure?
Government expenditure on goods and services within the current fiscal year.
65
Define Capital Expenditure.
Government expenditure on long-term projects.
66
What is the Keynesian Multiplier?
A calculation that shows an increase in injections in the economy results in a proportionately greater effect on aggregate demand.
67
What is Crowding Out?
An effect where increased government borrowing (as a result of fiscal policy) causes commercial bank interest rates to rise, reducing household consumption and capital investment.
68
What are Automatic Stabilizers?
Fiscal policy measures that reduce fluctuations in economic activity, stabilizing the growth.
69
What are Supply-Side Policies?
Long-term government strategies used to increase the quality and quantity of factors of production to influence the productive capacity of the economy.

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