Microeconomics and Macroeconomics

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Expansion
Or recovery, is a phase of increase in the economy. Highest moment of a increase is called a peak, and a peak that sustains for an extended time is called a period of prosperity.
Recession
Or contraction, is a phase of decrease in the economy. Lowest moment of this decrease is called a trough, and a trough that sustains for an extended time is called a depression.
Deflation
Decline in prices. Since deflation comes with a decrease in production, there is a large amount of unemployment. Which means consumers have less money to spend and have decreased access to goods and services.
Inflation
Steady rise in prices; currency is widely available during this time, but it is so available that prices must rise to compensate. The result is that money loses its value in purchasing good and services.
Stagflation
Occurs when there is slow economic growth along with inflation. Which means people have to pay higher prices for many things, but their incomes have remained the same.
Consumer price index
CPI takes a standard base year, and measures average price changes compared to that base year. This calculation determines how much more or less consumers are paying from year to year.
National debt
Is total amount of money that a government owes.
Budget deficits
Occurs when federal spending exceeds federal revenue within a fiscal year.
Trade deficit
Is a foreign trading imbalance in which the value of a nation’s exceeds the value of its exports.
Trade Surplus
In which the value of a nation’s exports exceeds that of its imports.
Price
Is how much money is exchanged for good or services. The relationship between supply and demand creates price. Price tells who gets good and services.
Incentives
Are things that excite or get people interested or motivated to do something. Incentives can influence the way people act economically.
Aggregate supply
Is the supply of all goods and services within a country. Likewise, the aggregate demand refers to the demand for all goods and services within a country.
Cyclical Unemployment
Occurs because of a contracting economy. When there is an economic downturn, people and businesses spend less money. When businesses are earning less money, they might reduce the number of workers that they have.
Frictional unemployment
Occurs when people are in between jobs and are waiting for the right opportunity to come along. Example of frictional unemployment is a person who recently graduated from college and is looking for a job in his or her field of study.
Structural unemployment
Occurs when people who are seeking jobs do not have the skills that are needed by employers. To avoid structural unemployment is to continue their education and learn new skills that are in demand.
Fiscal policy
Deals with the budget for government spending (i.e. borrowing and taxation), which is an important part of the Gross Domestic Product.
Taxes
Are used to provide government revenue and fund government programs and operations.
Regressive tax
Poorer people pay a higher percentage of their income than wealthier people do. An example of this is sales tax, which is based off the value of goods purchased instead of the buyer’s income.
Proportional tax
Charges everyone the same percentage of income.
Progressive tax
Charges a higher percentage of income for wealthier people than it does for the less wealthy. The more income a person makes, the higher the percentage of income tax he or she has to pay.
Excise tax
Is a tax imposed on a certain good. Excise taxes on alcohol and tobacco, for example, serve to discourage people from buying these products and raise revenue for the government.
Tight monetary policy
Allows less money in circulation, which encourages saving and discourages loans by forcing loan interest rates to rise.
Loose monetary policy
Puts more money in circulation, which encourages spending and discourages saving.
Open market operations
In which the Fed buys government securities to increase money in the economy or sells government securities to decrease money.
Reserve requirement
The federal reserve system holds bank accountable to a reserve requirement, which makes the bank possess a certain amount of funds with the Fed and allows the Fed to manage how many loans have been issued by the banks.
Income tax
A tax that is worth a percentage of a person’s income. Most income tax is collected through tax withholding, which gives a percentage of one’s income directly to the tax authorities.
Property tax
A tax on land and buildings owned by an individual (state and local)
Sales tax
A tax which is a percentage of goods and services (state and local)
Payroll tax
A tax on wages and salaries to fund social insurance programs (federal)
Corporate tax
A tax on the earning of corporations (federal)
Tariffs
A tax levied on important or exported good (federal)
Estate tax
A tax on all of the wealth of the recently deceased (federal and state)
Categories: Macroeconomics