Macroeconomics concepts overview

Aggregate Demand– The total amount of goods and services consumers are willing to buy. – Example: all the products and services that people, businesses, and the government will buy
Aggregate Supply– The total supply of all the goods and services available in an economy. – Example: all the products and services which are made available by suppliers
Business Cycle– Refers to the changes in economic activity of a company over the long term. – Example: It may consist of growth, stagnation, and decline.
Central Bank– A financial institution responsible for the monetary policy of a country. – Example: European Central Bank in Europe, Federal Reserve System in the USA
Consumer Price Index– An economic measure of inflation in the domestic economy, determined by tracking the prices of a specific set of goods and services purchased by the public. – Example: Used to determine the rate of inflation, current prices are compared to a base year.
Cyclical Unemployment– Unemployment that is caused by a downturn in the business cycle. – Example: Corporate layoffs in a recession cause this type of unemployment.
Deflation– A general decrease in the level of prices. – Example: It results in an increase in the real value of money.
Depression– An economic term that refers to a prolonged period of economic decline with large numbers of unemployed, shrinking incomes, and general economic hardship. – Example: The United States had a “Great” one in 1929.
Discount Rate– The interest rate charged by the Federal Reserve for loans to member banks. – Example: One of the ways the Federal Reserve controls the money supply, it might be around 5% right now.
Disposable Income– The economic term that refers to one’s total income that is left following the payment of all required taxes.
Economic Growth– The increase in the value of the goods and services produced by an economy.
Excise Tax– A tax on production, transportation, sale, or consumption of a certain good or service. – Example: gas tax, cigarette tax
FDIC– A federally sponsored corporation that insures deposits in national banks and certain other qualifying financial institutions up to a stated amount.
Federal Reserve System– The central bank of the United States. – Example: Supervises commercial banks by monitoring accounts and controlling interest rates.
Final Goods– Tangible items that are produced and eventually consumed by the buyer; used when calculating GDP. – Example: Cars, televisions, and clothing, NOT iron, wood, and cotton.
Fiscal Policy– The government program of spending and taxation to promote desired economic goals for the nation. – Example: This is how the government tries to keep the economy stable.
Frictional Unemployment– Unemployment caused by people changing jobs. – Example: This is not caused by changes in the business cycle but by people leaving one job to find another.
GDP per Capita– One of the measures of national income and output for a given country’s economy. – It is defined as the total market value of all final goods and services produced within the country in a calendar year. – Example: Gross Domestic Product
Government Deficit– Occurs when a government spends more money than it takes in. – Example: For the US, it is currently $8,944,609,455,758.69. Whoops, now it’s higher.
Gross Domestic Product– The total value of all the goods and services produced within a country in a given year. – Example: One way to measure the economic growth or decline of a nation.
Income Tax– A tax levied on net personal or business income.
Inflation– A rise in the general level of prices. – Example: Reduces the value of a dollar, usually measured by the Consumer Price Index.
Interest Rate– The percentage of a financial loan that is paid as a fee over a period of time. – Example: APR
Macroeconomics– The study of an economy as a whole. – Example: Economics is divided into two fields – microeconomics and this.
Monetary Policy– A plan of the government to regulate the money supply in the nation. – Example: In the United States, the Federal Reserve System controls this by adjusting interest rates.
National Debt– The total amount of money a nation owes its creditors. – Example: For the United States, this is in the trillions of dollars.
Open Market– A freely competitive market operating without government-imposed restrictions.
Open Market Transaction– Most stock market transactions where an investor purchases stock shares. – In this situation, the purchase indicates that the investor believes that the stock will gain value.
Payroll Taxes– Withholdings from employees’ wages paid to the federal, state, or local governments. – Example: Income, Social Security, Medicare, and Unemployment are examples.
Producer Price Index– An economic indicator computed by the Bureau of Labor Statistics that measures the average change in prices received by US producers for their goods over a period of time.
Progressive Tax– A tax where the percentage paid in tax increases as the level of income rises. – Example: Federal income tax is an example of this type of tax.
Proportional Tax– A type of taxation that takes the same percentage of one’s income regardless of how much or how little one makes.
Recession– A decline in a country’s GDP for two or more successive quarters. It is usually characterized by a significant decline in economic activity. – Example: 1979-1980 and the Energy Crisis, 2001-2003 and the dot-com bust.
Regressive Tax– A type of taxation that takes a higher percentage of one’s salary as one’s income decreases. – Example: Sales taxes are an example of this kind of tax.
Regulation– Legal restrictions set forth by a government to produce desired outcomes. – Example: Anti-monopoly laws are put in place to eliminate the risk of high prices and total control.
Reserve Requirement– The percentage of their deposits that member banks must keep available in a Federal Reserve Bank. – Example: Right now around 10-15%.
Revenue– The total amount of money that is brought into a company or government by its business activities or taxation policies. – Example: In the case of the federal government, this is money gained through taxes, fines, fees, etc.
Sales Tax– A tax on goods and services, a percentage of the retail price. – Example: Some states have it, some states do not.
SPLOST– This tax can be levied by any county for the purpose of funding the building and maintenance of parks, schools, roads, and other public facilities. – Example: The Special Purpose Local Option Sales Tax adds an additional 2% onto the existing state sales tax of 4%.
Stagflation– A period of large price inflation combined with no output growth, increasing unemployment, and a recession.
Structural Unemployment– Unemployment that is caused by changes in technology or reduced demand for certain products. – Example: An example of this would be typewriter repairmen who are out of work because of the popularity of computers.
Subsidy– Financial assistance from the government to encourage the production of or the purchase of a good. – Example: A federal grant, a tax break, or a trade barrier.
Tariff– A tax on imported goods and is usually designed to protect domestic production of similar goods.
Transfer Payment– A payment made by the government to someone who does not produce a good or service in return. – Example: Examples would be a Social Security Disability check or an unemployment check.
Unemployment– The lack of jobs for willing workers. – Example: Joblessness.
Unemployment Rate– The percentage of the civilian workforce who are available for a job but do not have one. – Example: This is one of the ways the health of an economy is measured.

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