Macroeconomics

Cards (24)

• 1
  Front

  What does the law of demand state?

  Back

  As the price of a good rises, the quantity demanded falls, and as the price falls, the quantity demanded rises, all else being equal.

• 2
  Front

  What does the law of supply state?

  Back

  As the price of a good rises, the quantity supplied increases, and as the price falls, the quantity supplied decreases, all else being equal.

• 3
  Front

  What is market equilibrium?

  Back

  The point where quantity demanded equals quantity supplied, resulting in a stable market price with no tendency to change.

• 4
  Front

  What causes a shift in the demand curve (as opposed to movement along it)?

  Back

  A change in a non-price determinant such as consumer income, tastes, prices of related goods, expectations, or the number of buyers.

• 5
  Front

  What is Gross Domestic Product (GDP)?

  Back

  The total market value of all final goods and services produced within a country's borders in a given time period.

• 6
  Front

  What are the four components of GDP in the expenditure approach?

  Back

  Consumption (C), Investment (I), Government Spending (G), and Net Exports (X - M). GDP = C + I + G + (X - M).

• 7
  Front

  What is the difference between real GDP and nominal GDP?

  Back

  Nominal GDP is measured in current prices; real GDP is adjusted for inflation, making it a better measure of actual economic growth.

• 8
  Front

  What is inflation?

  Back

  A sustained increase in the general price level of goods and services in an economy over time, reducing the purchasing power of money.

• 9
  Front

  What is the Consumer Price Index (CPI)?

  Back

  A measure of inflation that tracks changes in the average price of a fixed basket of goods and services purchased by typical households.

• 10
  Front

  What is the difference between demand-pull inflation and cost-push inflation?

  Back

  Demand-pull inflation results from excess aggregate demand; cost-push inflation results from rising production costs, such as higher wages or raw material prices.

• 11
  Front

  How is the unemployment rate calculated?

  Back

  Unemployment rate = (Number of unemployed / Labor force) × 100, where the labor force includes employed and actively job-seeking individuals.

• 12
  Front

  What are the three main types of unemployment?

  Back

  Frictional (between jobs), structural (skills mismatch), and cyclical (due to economic downturns).

• 13
  Front

  What is the natural rate of unemployment?

  Back

  The unemployment rate when the economy is at full employment, consisting of only frictional and structural unemployment, with no cyclical unemployment.

• 14
  Front

  What is fiscal policy?

  Back

  The use of government spending and taxation by a government to influence economic activity and stabilize the economy.

• 15
  Front

  What distinguishes expansionary fiscal policy from contractionary fiscal policy?

  Back

  Expansionary fiscal policy increases government spending or cuts taxes to stimulate the economy; contractionary policy decreases spending or raises taxes to slow it down.

• 16
  Front

  What is the fiscal multiplier effect?

  Back

  The phenomenon where an initial change in government spending leads to a larger total change in GDP because spending cycles through the economy multiple times.

• 17
  Front

  What is monetary policy?

  Back

  The process by which a central bank manages the money supply and interest rates to achieve macroeconomic goals like price stability and full employment.

• 18
  Front

  What are the three primary tools of the Federal Reserve?

  Back

  Open market operations (buying/selling government securities), the discount rate (interest rate on loans to banks), and reserve requirements (minimum deposits banks must hold).

• 19
  Front

  What is the Federal Reserve System?

  Back

  The central bank of the United States, responsible for conducting monetary policy, supervising banks, maintaining financial stability, and providing banking services.

• 20
  Front

  How does raising the federal funds rate help control inflation?

  Back

  Higher rates increase borrowing costs, reducing consumer spending and business investment, which lowers aggregate demand and puts downward pressure on prices.

• 21
  Front

  What is the Phillips Curve?

  Back

  A model showing an inverse short-run relationship between inflation and unemployment: lower unemployment tends to coincide with higher inflation, and vice versa.

• 22
  Front

  What is comparative advantage in international trade?

  Back

  A country has a comparative advantage in producing a good when it can produce it at a lower opportunity cost than another country.

• 23
  Front

  What is a trade deficit, and what does it indicate?

  Back

  A trade deficit occurs when a country's imports exceed its exports (negative net exports), indicating it is spending more on foreign goods than it earns from selling abroad.

• 24
  Front

  What effect do protective tariffs generally have on domestic consumers and producers?

  Back

  Tariffs raise prices for consumers, reducing quantity demanded of imports, while benefiting domestic producers by shielding them from foreign competition.