Ch 6 – Flashcard
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self regulating economy
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in a self regulating economy, problems such as unemployment are resolved without government intervention, through the working of the invisible hand
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keynesian economics
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according to keynesian economics economic slumps are caused by inadequate spending and they can be mitigated by government intervention
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monetary policy
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monetary policy uses changes in the quantity of money to alter interest rates and affect overall spending
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fiscal policy
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fiscal policy uses changes in government spending and taxes to affect overall spending
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recessions
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recessions or contractions are periods of economic downturn when output and employment are falling
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expansions
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expansion, or recoveries are periods of economic upturn when output and employment are rising
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business cycle
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the business cycle is the short run alternation between recessions expansions
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business cycle peak
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the point at which the economy turns from expansion to recessions is a business cycle peak
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business cycle peak
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the point at which the economy turns from recessions to expansions is a business cycle through
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long run economic growth
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long run economic growth is the sustained upward trend in the economy's output over time
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inflation
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a rising overall level of prices is inflation
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deflation
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a falling overall level of prices is a deflation
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price stability
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the economy has price stability when the overall level of prices changes slowly or not at all
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open economy
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an open economy is an economy that trades goods and services with other countries
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trade deficit
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a country runs trade deficit when the value of goods and services bought from foreigners is more than the value of goods services it sells to them
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trade surplus
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trade surplus when the value of goods and services bought from foreigners is less than the value of good and services it sells to them
