Economic Foundations
The basic economic problem that occurs because wants exceed resources.
What is scarcity?
The point where buyers and sellers agree on price and quantity.
What is equilibrium?
The dollar value of all final goods and services produced in a nation annually.
What is GDP?
The unemployment level that exists when the economy is healthy.
What is natural rate of unemployment?
The stated interest rate before inflation is removed.
What is nominal interest rate?
A model that shows trade-offs and efficiency using limited resources.
What is PPC?
A movement along the demand curve caused only by a price change.
What is change in quantity demanded?
GDP divided by population to measure standard of living.
What is per capita GDP?
A gap where real GDP exceeds potential GDP.
What is positive gap?
The interest rate after adjusting for inflation.
What is real interest rate?
The cost measured by what you give up when choosing one option over another.
What is opportunity cost?
When consumers buy more of a cheaper product instead of a more expensive alternative.
What is substitution effect?
GDP measured using current prices.
What is nominal GDP?
Government action that increases spending or cuts taxes to fight a recession.
What is expansionary policy?
A financial asset representing ownership in a company.
What is stock?
When a country can produce more of a good using the same resources than another country.
What is absolute advantage?
If both demand increases and supply decreases, this happens to equilibrium price.
What is increase?
A sustained rise in the overall price level measured by CPI.
What is inflation?
A sudden increase in oil prices causing SRAS to shift left is an example of this.
What is supply shock?
An asset that pays fixed interest and represents lending money to a company or government.
What is bond?
If a country gives up fewer units of one good to produce another good compared to another country, it has this.
What is comparative advantage?
When demand decreases while supply increases, the effect on equilibrium quantity is this.
What is decrease?
Inflation caused by higher production costs shifting aggregate supply left.
What is cost-push inflation?
When government borrowing raises interest rates and reduces private investment spending.
What is crowding out?
When government spending exceeds revenue in a single year, this occurs.
What is deficit?