Macroeconomics Flashcards

Only 10 flashcards are shown at a time! Once you’ve mastered these 10 Economic terms, click the shuffle button below for 10 new terms. There are approximately 150 flashcards covering Macroeconomics.

Short run aggregate supply
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An upward sloping curve, relatively flat below the full employment level of output, and relatively steep beyond the full employment level, showing the amount of output a nation’s producers will supply at a range of price levels in a particular period of time. The curve’s shape reflects the fact that output cannot grow beyond the full employment level due to the limited factors of production available in the economy, but when aggregate demand falls output will decline due to the inflexibility of wages in the short run.

Short run aggregate supply
Exports
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The spending by foreigners on domestically produced goods and services. Counts as an injection into a nation’s circular flow of income.

Exports
Loanable funds market
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The market in which the demand for private investment and the supply of household savings intersect to determine the equilibrium real interest rate. Can be used to illustrate the crowding-out effect of deficit-financed fiscal policy, which causes the supply of funds to become more scarce as households save more money in government bonds.

Loanable funds market
Public sector
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Refers to the activities undertaken by the government or the state. “Public sector investment” generally refers to government spending on infrastructure.

Public sector
Free market economy
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An economic system in which resources are allocated purely by the forces of demand, supply and the price mechanism. The government has no influence over what is produced, how it is produced and for whom.

Free market economy
Nominal GDP
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The quantity of various goods produced in a nation times their current prices, added together. Can increase either as a result of an increase in real output or an increase in the price level.

Nominal GDP
Resource market
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The market in a nation’s circular flow in which households provide firms with the factors of production (land, labor and capital) in exchange for money incomes (rent, wages and interest). Firms are the buyers, households are the sellers in the resource market.

Resource market
Deflationary gap
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Also called the recessionary gap. The difference between the equilibrium level of national output in a nation and the full employment level of output when a nation is in a demand-deficient recession. Called “deflationary gap” because the fall in AD that caused it likely caused some deflation in the economy as well.

Deflationary gap
GDP Deflator
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The price index which takes into account all final goods and services produces in a nation. Used to adjust the nominal GDP into real GDP. Nominal GDP divided by the this gives you the real GDP.

GDP Deflator
Tax
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A payment made by an individual or a firm to the government, usually levied on income, property or the consumption of goods and services. Taxes are a leakage from the circular flow of income, but they provide government with the money they use to provide government services and public goods.

Tax

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