Basic Economic Concepts
This economic concept shows the maximum combinations of two goods that an economy can produce given its resources and technology.
What is the production possibilities curve?
This economic indicator measures the total value of all goods and services produced within a country's borders during a specific period, typically a year. It is often used as a measure of a country's economic output and standard of living.
What is gross domestic product (GDP)?
This macroeconomic concept represents the total quantity of goods and services that all consumers, businesses, governments, and foreigners are willing and able to buy at different price levels, in a given period of time.
What is aggregate demand?
These are intangible assets that represent a claim to future cash flows or other financial benefits. Examples of financial assets include stocks, bonds, options, and futures contracts. They are often traded in financial markets, allowing investors to buy and sell them as a way of investing and managing risk.
What are financial assets?
This economic concept shows the inverse relationship between unemployment and inflation in an economy. It suggests that when unemployment is low, inflation tends to be high, and vice versa.
What is the Phillips Curve?
This economic concept occurs when the quantity of a good or service that buyers are willing and able to purchase at a certain price matches the quantity that sellers are willing and able to produce and offer for sale at the same price.
What is market equilibrium?
This visual model illustrates the flow of goods, services, and money between households and businesses in an economy. It shows how households provide factors of production, such as labor and capital, to businesses, which in turn produce goods and services.
What is the circular flow diagram?
This economic concept measures the impact of changes in autonomous expenditure, such as government spending or investment, on the overall output and income in an economy. It represents the ratio of the total change in output or income to the initial change.
What is the expenditure multiplier?
This economic concept represents the nominal interest rate adjusted for inflation, which reflects the true cost of borrowing or the true return on saving. It is calculated by subtracting the inflation rate from the nominal interest rate.
What are real interest rates?
This economic concept refers to the rate at which the general level of prices for goods and services in an economy is increasing over time. It is often measured by the percentage change in a price index over a given period of time.
What is inflation?
This graphical representation shows the relationship between the quantity of a good or service that producers are willing and able to offer for sale at different prices, assuming all other factors remain constant.
What is the supply curve?
These are economic transactions that do not involve the exchange of money or a market transaction, such as household production or volunteer work. These activities are not captured in official measures of GDP, but they still contribute to the overall well-being of individuals and society.
What are nonmarket transactions?
This macroeconomic concept represents the total quantity of goods and services that all firms in an economy are willing and able to produce and supply at different price levels, in a given period of time, assuming that the prices of factors of production, such as labor and capital, remain constant.
What is short-run aggregate supply?
A banking system where commercial banks are required to hold a certain percentage of their customers' deposits as reserves and are allowed to lend out the remainder. This practice creates new money in the economy, as the loans made by banks result in new deposits in the banking system.
What is fractional reserve banking?
This economic concept refers to the total amount of outstanding debt that a government owes to its creditors, including individuals, institutions, and foreign governments. It is often measured as a percentage of a country's Gross Domestic Product (GDP) and can be incurred through government spending or borrowing.
What is the national debt?
This economic principle states that a country should specialize in producing and exporting the goods or services that it can produce at a lower opportunity cost than other countries, while importing the goods or services that it would have to produce at a higher opportunity cost.
What is comparative advantage?
This economic indicator measures the percentage of the labor force that is currently unemployed but actively seeking employment. It is often used as a measure of the health of an economy and can indicate the level of job opportunities available to workers.
What is the unemployment rate?
This macroeconomic concept represents the total quantity of goods and services that all firms in an economy are willing and able to produce and supply at different price levels, in the long run, assuming that all factor prices, such as wages and capital costs, have fully adjusted to any changes in the economy.
What is long-run aggregate supply?
This financial market deals with short-term debt securities that mature in one year or less, such as Treasury bills, certificates of deposit, and commercial paper. It is often used by banks, corporations, and governments to manage their short-term financing needs and to invest excess cash.
What is the Money Market?
This economic concept refers to the phenomenon where an increase in government spending, financed through borrowing or printing money, leads to a reduction in private sector investment.
What is crowding out?
This economic situation occurs when there is either a surplus or a shortage of a good or service in a market, which leads to a price adjustment to restore equilibrium.
What is disequilibrium?
This economic indicator measures the average change over time in the prices paid by consumers for a basket of goods and services. It is often used as a measure of inflation and the cost of living, as it reflects the price changes that affect households.
What is the Consumer Price Index (CPI)?
This economic model combines the concepts of aggregate demand and aggregate supply to analyze the behavior of an economy in response to changes in the overall demand for goods and services and the overall supply of goods and services over time.
What is the Aggregate Demand–Aggregate Supply (AD-AS) Model?
This financial market represents the supply of and demand for loans in an economy. It brings together borrowers, such as households, firms, and governments, and lenders, such as banks, mutual funds, and individuals, to determine the interest rate at which loans are made and borrowed.
What is the Loanable Funds Market?
This economic concept represents the relationship between inputs, such as labor and capital, and the output or production level of an economy. It is used to understand the factors that contribute to an economy's total output and productivity, as well as the impact of changes in technology, labor force, and capital stock.
What is the aggregate production function?