Econ Basics Reloaded (Unit 1)
This term describes a situation where wants exceed available resources.
What is scarcity?
This is the phase of the business cycle where economic activity is at its highest.
What is a peak?
This component of aggregate demand includes purchases of new homes and machinery.
What is investment spending?
This institution serves as the central bank of the United States.
What is the Federal Reserve?
This type of resource includes forests, minerals, and water.
What is a natural resource?
A good for which demand increases as income rises, like a luxury car.
What is a normal good?
A price index that measures the cost of a basket of goods and services typically consumed by households.
What is the Consumer Price Index (CPI)?
A decrease in this shifts the aggregate supply curve to the left, raising prices.
What is resource availability (or productivity)?
This function of money allows it to be saved and used for future purchases.
What is a store of value?
A prolonged economic downturn lasting at least two consecutive quarters of GDP decline.
What is a recession?
This occurs when a change in a resource shifts the entire production possibilities curve outward.
What is economic growth?
This type of unemployment results from a mismatch between workers’ skills and job requirements.
What is structural unemployment?
This occurs when the economy produces beyond its full-employment output, causing inflation.
What is an inflationary gap?
The percentage of deposits that banks must hold and not lend out.
What is the reserve requirement?
This determinant of aggregate demand increases when foreign incomes rise, boosting exports.
What is net export spending?
The benefit gained from consuming one additional unit of a good or service.
What is marginal utility?
This measures output per worker and is a key indicator of economic efficiency.
What is productivity?
This fiscal policy tool increases aggregate demand by reducing personal income taxes.
What is a tax cut?
This occurs when the Fed sells bonds, reducing the money supply.
What is contractionary monetary policy?
This occurs when banks lend more than their reserves, amplifying the money supply.
What is fractional reserve banking?
This type of trade-off occurs when producing more of one good requires giving up increasingly larger amounts of another.
What is a concave (or bowed-out) PPC?
The natural rate of unemployment plus this equals the actual unemployment rate during a recession.
What is cyclical unemployment?
In the long run, this vertical line represents the economy’s maximum sustainable output.
What is the long-run aggregate supply (LRAS) curve?
his equation relates the money supply and velocity to nominal GDP (MV = PY).
What is the quantity theory of money?
This concept explains why the short-run aggregate supply curve slopes upward due to fixed wages and prices.
What is price stickiness?