Economics — Macroeconomics Core

What is the Phillips Curve?

A concept showing an inverse relationship between the rate of inflation and the unemployment rate.

Aggregate Demand

The total demand for goods and services within an economy at a given overall price level and in a given time period.

Aggregate Supply

The total supply of goods and services that firms in an economy plan to sell at a given overall price level and in a given time period.

What is the difference between nominal and real GDP?

Nominal GDP is the total economic output measured in current prices, without adjusting for inflation. Real GDP adjusts for inflation, reflecting the true value of goods and services.

Business Cycle

The fluctuation in economic activity that an economy experiences over time, typically involving periods of economic expansion and contraction.

What does the term 'stagflation' mean?

A situation in the economy where the inflation rate is high, the economic growth rate slows, and unemployment remains steadily high.

Keynesian Economics

An economic theory stating that government intervention is necessary to help economies emerge from recession.

Supply-Side Economics

An economic theory that argues economic growth is most effectively fostered by lowering taxes and decreasing regulation.

Hyperinflation

An extremely high and typically accelerating inflation rate, often exceeding 50% per month.

What role does the central bank play in an economy?

The central bank manages a nation's currency, money supply, and interest rates. It also oversees the banking system and implements monetary policy.

Quantitative Easing

A monetary policy where a central bank buys government securities or other securities to increase the money supply and encourage lending and investment.

Exchange Rate

The value of one currency for the purpose of conversion to another.

Balance of Payments

A record of all economic transactions between the residents of a country and the rest of the world over a period.

What is a trade deficit?

A situation where a country's imports exceed its exports, leading to a negative balance of trade.

Purchasing Power Parity (PPP)

An economic theory that compares different countries' currencies through a 'basket of goods' approach.

Consumer Price Index (CPI)

A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.

What is the function of fiscal policy in controlling inflation?

Fiscal policy can control inflation by reducing government spending or increasing taxes, which decreases aggregate demand.

Deflation

A decrease in the general price level of goods and services, often associated with a reduction in the supply of money or credit.

What is the Laffer Curve?

A representation of the relationship between tax rates and tax revenue, illustrating that there is an optimal tax rate that maximizes revenue.

Interest Rate

The amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets.

What is the role of government bonds in monetary policy?

Government bonds are used by central banks to control the money supply and interest rates through open market operations.

Recession

A period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.

What is the concept of 'crowding out' in economics?

Crowding out occurs when increased government spending leads to reduced investment by the private sector due to higher interest rates.

Lorenz Curve

A graphical representation of the distribution of income or wealth within an economy.

Gini Coefficient

A measure of the inequality of a distribution, a value of 0 expressing perfect equality and a value of 1 maximal inequality.