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Macroeconomic Goals
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Steady growth, stable prices, low rates of unemployment, a balance of imports and exports
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Role of Government in Circular Flow Model
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The government should play a role in overseeing the working of the economy, but should not intervene in its day to day functioning.
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Gross Domestic Product (GDP)
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A measurement of the total goods and services produced within a country.
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output-expenditure model
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Macroeconomic model used to show aggregate demand by the consumer, investment, government, and foreign sectors
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employment rate
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the percentage of the civilian non institutional population that is employed
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unemployment rate
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the number of people without jobs who are looking for work divided by the number in the labor force
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CPI (Consumer Price Index)
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a measure of the overall cost of the goods and services bought by a typical consumer
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Inflation
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A general and progressive increase in prices
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unanticipated inflation
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inflation that is not expected
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Real GDP
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GDP adjusted for inflation
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Aggregate Demand
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the amount of goods and services in the economy that will be purchased at all possible price levels
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Aggregate Supply
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the total amount of goods and services in the economy available at all possible price levels
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seasonal unemployment
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unemployment linked to seasonal work
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structural unemployment
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unemployment that occurs when workers' skills do not match the jobs that are available
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frictional unemployment
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A type of unemployment caused by workers voluntarily changing jobs and by temporary layoffs; unemployed workers between jobs.
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business cycle
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Alternating periods of economic expansion and economic recession
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Recession vs. Depression
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A recession is characterized as a period of negative economic growth for two consecutive quarters. In a recession, unemployment will rise, output fall and government borrowing increase. A depression is a recession much more severe and long lasting.
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