Macroeconomics
Self-adjustment: The process through which marketimbalancesoroutputgapsself-adjustto restore equilibrium as prices become more flexible in the long run. Short-run aggregate supply (SRAS): Thetotal outputofaneconomysuppliedwhentheprices offactorsofproductionaresticky,meaningthat theydidnothavethetimetoadjusttoeconomic changes. Short-run aggregate supply curve (SRAS curve): A line that shows the positive relationship between short-run aggregate supply and the price level, meaning that when the price level increases, SRAS increases, and vice versa. Short-run Phillips curve (SRPC): A line that shows the negative relationship and trade-off between inflation and unemployment in the short run. Short-run macroeconomic equilibrium: The point of intersection between the aggregate demand and the short-run aggregate supply curves, indicating that the aggregate output demanded is equal to the short-run aggregate output supplied. Simple circular flow of incomes and expenditures: A diagram that shows how goods, services, money, and factors of production flow betweenhouseholdsandfrms in a closed economy. Simple money multiplier (MM): The ratio of money supply to the monetary base. It shows howmanyadditionaldollarswillbecreatedwith each addition to the monetary base, such as when bank reserves increase. Specialization: The focus of individuals, frms, andeconomiesonproducingwhattheyhavean
advantage in; usually based on comparative advantage. Stock: Ashareofownershipinafrmthatpays dividends. Store of value: The abilityofanassettoallow people to save because it carries purchasing power from one period of time to another. Structural unemployment: Unemployment causedbychangesinthestructureofeconomic activity, such as technological advancements that replace workers. Substitutes: Alternativegoodsorservices,such as two different brands of chocolate that can substitute each other. Supply: The willingness and ability of a producer to provide a good or service at given prices. Supply schedule: A table that shows thedata from which a supply curve is drawn, including price and quantity supplied. Supply-side policy: An economic policy that changes macroeconomic aggregates by targeting aggregate supply. Sustainable economic growth: Economic growth that also protects future generations’ ability to experience economic growth. Tax multiplier: The ratio of a change in real GDP to a change in taxes. Technology: The application of scientifc knowledge and tools to create, modify, or enhance products, processes, or systems for practical purposes. Terms of trade/trading price: The ratio at which a country can trade domestic products for imported ones.
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