Macroeconomics
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- Healthy economies promote economic growth, limit unemployment, and keep prices stable.
- GDP measures the value of economic activity within a country.
- These items are not included in GDP: intermediate goods, non-production transactions, non-market transactions, and illegal activities.
- GDP per capita identifies how many goods or services each person produces.
- Real GDP adjusts for inflation; nominal GDP does not.
- The expenditure approach to estimating GDP is represented by the equation: Y = C + I + G + (X ā M).
- When there is inflation in an economy, there is an increase in prices and a fall in the purchasing value of money.
- Inflation is limited when prices are stable; average prices are constant over time or rising at a predictable and very low rate.
- The amount of unemployment that exists regardless of the health of the economy is called the natural rate of unemployment.
- Cyclical unemployment occurs during periods of recession.
- Business cycles are measured and followed in terms of GDP and unemployment.
- The Fed regulates and oversees the nationās commercial banks and conducts monetary policy.
- Monetary policies determine interest rates and the supply of money in circulation.
- Fiscal policies determine whether taxes are increased or decreased and how much money is spent on projects to stimulate the economy and increase employment.
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