Unit 1
This is the next best alternative given up when a decision is made.
What is opportunity cost?
The total market value of all final goods and services produced within a country in a year.
What is GDP (Gross Domestic Product)?
This institution controls the money supply and interest rates in the U.S.
What is the Federal Reserve?
A curve that shows the maximum combinations of two goods an economy can produce.
What is the Production Possibilities Curve (PPC)?
This is GDP adjusted for inflation.
What is real GDP?
The interest rate banks charge each other for overnight loans.
What is the federal funds rate?
When more of a good is produced, the opportunity cost increases.
What is the law of increasing opportunity cost?
The formula used to calculate GDP using spending.
What is C + I + G + (X − M)?
When the Fed buys government securities, this happens to the money supply.
What is it increases?
This type of efficiency occurs when goods are produced at the lowest possible cost.
What is productive efficiency?
This type of unemployment occurs when workers are between jobs.
What is frictional unemployment?
This measures how much the money supply can expand from an initial deposit.
What is the money multiplier?
A point inside the PPC represents this type of economic condition.
What is inefficiency (underutilization of resources)?
The phase of the business cycle where the economy is shrinking.
What is a recession?
If the reserve requirement is 10%, the money multiplier equals this number.
What is 10?