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ECN CHAP3

QuestionAnswer
Macroeconomics Part of economics that deals with the economy as a whole.
GDP Gross Domestic Product, Dollar value of all goods and services produced for final sale in the US in a year
Inflation Rate Percentage increased in CPI (Consumer Price Index)
Microeconomics Part of economics that deals with individual markets and firms.
RGDP Real Gross Domestic Product, inflation adjusted GDP
Recession Declining period of at least two quarters in a business cycle
Discouraged Worker Effect Bad news induces people to stop looking for work, causing the unemployment rate to fall
Fiscal Policy Using government spending and tax policy to influence RGDP and prices
Real balances effect Higher prices reduce spending power
Monetary Policy Using interest rates to influence RGDP and prices
Cost Push Inflation Input costs increase and that drives prices up
Supply Side Economics Government policy intended to influence the economy via aggregate supply by lowering input costs and reducing regulation
COLA Cost of living adjustment that compensates people for the fact that inflation makes the spending power of their income less
Structurally unemployed People lose their jobs because of a change in the economy that makes their skills obsolete
Demand pull inflation Aggregate demand increases without an increase in aggregate supply
There is substantial improvement in oil production technology. How does this impact aggregate supply? What might happen to energy prices? Improvement to technology would increase Aggregate Supply, and when AS goes up, prices go down.
In a recession, what way would you shift interest rates to fix economy? How would RGDP and PI change? How do you think this will affect unemployment? Lower interest rates, when interest rates go down, Aggregate Demand goes up. Unemployment would decrease.
RGDP is not synonymous with social welfare. Name four reasons. Explain one way to measure this with RGDP. How might RGDP be different? Environmental issues, Home production, Black market, Military Spending. The RGDP would be measured by labeling prices of services. Altered RDGP would be higher than before
Created by: Carprincess