Macroeconomic Aims
What is economic growth?
This is the primary goal of most governments, measured by GDP growth.
What is fiscal policy?
This type of policy involves government spending and taxation.
What is the central bank?
This institution controls the money supply (e.g., the Fed or ECB).
What is inflation?
A general rise in prices across the economy.
What is a recession?
This occurs when GDP declines for two consecutive quarters.
What is unemployment?
keeping this low endures workers can find jobs
What is a budget deficit?
When the government spends more than it earns in taxes.
What are interest rates?
When the central bank raises these, borrowing becomes more expensive.
What is the CPI (Consumer Price Index)?
This index tracks inflation by measuring consumer prices.
What happens if a central bank lowers interest rates?
Borrowing becomes cheaper, encouraging spending.
What is the business cycle?
A stable economy avoids extreme highs and lows in this cycle.
What are transfer payments?
This fiscal tool gives money directly to people (e.g., stimulus checks).
What are open market operations?
Buying and selling government bonds to influence money supply.
What is deflation?
When prices fall, leading to reduced spending.
Name one thing that can cause economic growth.
Technology improvements, education, or investment.
What is the trade balance (or current account)?
When a country buys more than it sells abroad, this balance is negative.
What is expansionary fiscal policy?
Cutting taxes to boost economic growth is an example of this.
What is contractionary monetary policy?
A policy used to fight inflation by reducing money supply
What is cost-push inflation?
Inflation caused by rising production costs (e.g., oil prices).
What is stagflation?
This occurs when high inflation combines with stagnant economic growth.
What is income inequality?
This occurs when wealth is distributed unevenly in society.
What is a sovereign debt crisis?
High government debt can lead to this, where investors demand higher interest rates.
What is quantitative easing (QE)?
When interest rates are near zero, central banks may use this unconventional policy
What is Germany (Weimar Republic)?
Hyperinflation famously occurred in this country in the 1920s.
What are external shocks?
COVID-19 and climate change are examples of these unpredictable disruptions to macroeconomic models.