Vocab

Question 1

Investment

Answer 1

Spending on new capital goods (factories, equipment, technology, and inventories) by businesses and households, not including purchases of stocks or bonds

Question 2

Human Capital

Answer 2

The skills, knowledge, and experience possessed by workers, increasing their productivity.

Question 3

GDP

Answer 3

The total market value of all final goods and services produced within a country in a given year

Question 4

Frictional unemployment

Answer 4

Unemployment caused by people voluntarily changing jobs or entering the workforce; includes those temporarily between jobs

Question 5

Structural unemployment

Answer 5

Unemployment caused by changes in the structure of the economy that make certain skills obsolete

Question 6

Cyclical unemployment

Answer 6

Unemployment resulting from downturns in the business cycle, such as recessions

Question 7

Stagflation

Answer 7

A situation with high inflation and high unemployment occurring at the same time.

Question 8

Cost push inflation

Answer 8

Inflation caused by rising costs of production (like wages or raw materials) that push prices up

Question 9

Demand pull inflation

Answer 9

Inflation caused by increased demand for goods and services, pulling prices up

Question 10

Fiscal policy

Answer 10

Government use of spending and taxation to influence the economy

Question 11

Monetary policy

Answer 11

Central bank actions that manage the money supply and interest rates to influence the economy

Question 12

Velocity of money

Answer 12

The rate at which money circulates in the economy; how often a dollar is spent in a given period.

Question 13

Money supply

Answer 13

The total amount of money in circulation in an economy, including cash, coins, and checking deposits

Question 14

Real vs nominal interest rates

Answer 14

Nominal: The stated interest rate, not adjusted for inflation.
Real: The nominal rate minus expected inflation; reflects true purchasing power.

Question 15

Debt vs deficit

Answer 15

Deficit: The amount by which government spending exceeds revenue in a year.
Debt: The total accumulation of past deficits minus surpluses.

Question 16

Crowding out

Answer 16

When government borrowing increases interest rates, reducing private investment.

Question 17

Net exports

Answer 17

Exports minus imports; the value of goods and services sold abroad minus those bought from abroad

Question 18

Balance of payments (CA, CFA)

Answer 18

Current Account (CA): Records trade in goods/services, income, and transfers.
Capital/Financial Account (CFA): Records financial assets, investments, and capital flows between countries.