GDP and Economic Concepts
This is the total monetary value of all final goods and services produced within a country’s borders in a given period.
What is Gross Domestic Product (GDP)?
This is the official unemployment rate, calculated as the number of unemployed divided by the labor force.
What is U-3?
This is the total money supply measured by the sum of currency in circulation and checking accounts.
What is M1?
This phase of the business cycle is characterized by rising economic activity and employment.
What is Expansion?
This is the general increase in prices across the economy over time.
What is Inflation?
The approach where you sum all expenditures on final goods and services is called this.
What is the Expenditure Approach?
This type of unemployment occurs when people are temporarily between jobs.
What is Frictional Unemployment?
The Federal Reserve uses this tool to influence the money supply by buying and selling government securities.
What is Open Market Operations?
This is the total quantity of goods and services demanded in the economy at different price levels.
What is Aggregate Demand?
This measurement issue occurs when the Consumer Price Index (CPI) doesn’t account for the fact that consumers may switch to cheaper goods when prices rise.
What is Substitution Bias?
This economic measure adjusts GDP for depreciation to show the total value of a country's production that is available for consumption or investment.
What is Net Domestic Product (NDP)?
This is the situation where actual GDP is below potential GDP, indicating that the economy is not fully utilizing its resources.
What is the GDP Gap?
The money multiplier measures how much the money supply will increase based on an initial deposit. This is the formula used to calculate it.
What is the Money Multiplier (1 / Reserve Ratio)?
This is the total quantity of goods and services supplied in the economy at different price levels.
What is Aggregate Supply?
This effect describes how inflation erodes purchasing power, causing people to feel poorer.
What is the Income Effect?
This concept refers to the natural level of output that an economy can produce when operating at full employment, without causing inflationary pressures.
What is the Potential Output or Full Employment Output?
This occurs when there is not enough demand for goods and services to support full employment, and it leads to cyclical unemployment.
What is a Recession?
This monetary policy tool involves changing the interest rate paid on reserves held by banks at the Federal Reserve.
What is Interest on Reserve Balances (IoRB)?
The curve is vertical and reflects the economy’s potential output when operating at full employment. This represents the economy’s maximum sustainable output.
What is the Long-Run Aggregate Supply (LRAS)?
The difference between this type of income and another shows the effect of inflation on people’s purchasing power.
What is the difference between Nominal Income and Real Income?
This economic theory asserts that changes in aggregate demand only affect the price level in the long run, and the economy will return to full employment automatically through flexible wages and prices.
What is Classical Economics (Long-Run Aggregate Supply Theory)?
This law predicts that for every 1% increase in unemployment above the natural rate, GDP will be roughly 2% lower.
What is Okun’s Law?
When the Federal Reserve is trying to combat high unemployment, it is likely to implement this type of monetary policy.
What is Expansionary Monetary Policy?
This economic theory suggests that if unemployment and inflation are too high, the government should increase demand through fiscal stimulus.
What is Keynesian Economics?
High inflation may lead to this, which involves a reduction in the value of savings and fixed incomes.
What is the Redistribution of Wealth?