Download - Economic macroeconomic definitions
MacroeconomicsSemester 2
C = all household consumption on durables, non-durables and services I = firm’s replacement investment (spending on capital to maintain productivity) or induced investment to
increase production G = all government spending X-M = spending by foreigners on exports less domestic spending on imports
Business Cycle
Peak
Trough
Trough
ExpansionPeak
Real GDP
Potential GDP
A recession is when the economy experiences two consecutive quarters of falling GDP.
Recession
Government Spending + Taxation
Macroeconomic Goals
Growth
Employment
Price Stability
External Stability
Income Distribution
Inflation
Is a sustained increase in the general level of prices and a fall in the value of money
LRASAS
AD
Deflation
Is a persistent fall in the average level of prices in an economy.
Demand Pull inflationIs inflation that is caused by increasing AD in an economyThat shifts the AD curve to the right
AD1AD2
AS
Cost Push inflationIs the inflation that is caused by a increase inThe cost of production in the economyThat shifts the SRAS curve to the left.
AD
AS1
AS2
UnemploymentIs a situation that exists when people who are willing and able to work cannot get a job
Full employmentExists when the number of jobs available in an economy is equal to or greater than the number of people actively seeking work
Underemployment
When workers are carrying out jobs for which they are over qualified, that is they are not using their full skills and abilities or when workers are employed part time, even though they are available for full time employment, or when workers in a planned economy are undertaking jobs that would not exist in a free market
Demand deficientOr
Cyclical unemploymentIs unemployment that exists when there is insufficient AD in the economy and real wagesDo not fall to compensate for this
Direct taxationIs taxation imposed on people’s income or wealth, and on
firms profit.
Indirect TaxationIs tax on expenditure. IT is added to the selling price of a good or service