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❶The Keynesian school of economic thought argues that an increase in government expenditures or a reduction in taxes will stimulate an economy ; likewise, a reduction in government expenditures or an increase in taxes will constrict an economy and reduce inflation. He advocated models based on fundamental economic theory that would, in principle, be structurally accurate as economies changed.


Financial Definition of MACROECONOMICS
What is 'Macroeconomics'

To collect revenues, the government creates laws related to tax collection. This income is used to for expenditures related to the military, infrastructure, social welfare programs, and other bureaucratic endeavors.

Monetary policy defines the choices of the Federal Reserve Bank on choices related to the money supply. The Fed is a quasi-public organization that retains full control over the macroeconomic policies of the U.

The aggregate demand curve is the total demand for goods in a population on a specific price point. It is commonly depicted on a chart that shows how changes in prices of goods can impact its demand. In general, when prices go up, there will be less aggregate demand within the economy. Unemployment Rate The unemployment rate is percentage of people who are looking for work, but have not yet found work. Inflation Rate As more paper money is printed, it causes the relative value of the currency to decrease in value.

Fiscal Policy Fiscal policy defines the choices of government in relation to revenues and expenditures.

Monetary Policy Monetary policy defines the choices of the Federal Reserve Bank on choices related to the money supply. Aggregate Demand AD Curve The aggregate demand curve is the total demand for goods in a population on a specific price point.

Your browser is out of date. Gross Investment -- Investment that includes additions to the capital stock as well a the replacement of depreciated capital.

Income Producing Asset -- An asset that is used to generate revenue from the production and sale of goods and services. Indirect Business Taxes -- Taxes that tend to be built into the price of a particular good i. Income Taxes -- Taxes that are based on and vary with personal or corporate income. Indirect Finance -- The transfer of loanable funds deposits through the use of financial intermediaries commercial banks.

Induced Expenditure -- Changes in spending due to changes in national income. See the Marginal Propensity to Spend. Inflation -- An increase in the price level over some defined time period. Interest Sensitivity of Investment -- A measure of responsiveness of investment expenditure to changes to the real interest rate.

Interest Sensitivity of Money Demand -- A measure of responsiveness of the demand for cash balances to changes in the nominal interest rate. Intermediate Goods and Services -- Goods or services used to produce other goods i. Investment -- Changes to the existing capital stock or business inventories. Labor Force Participation Rate -- The ratio of those in the labor force the employed and unemployed and those that are available for work. Laspeyres Index -- A weighted average of prices based on the use of base-period consumption patterns.

Liquidity -- A measure of the ease by which a financial asset can be converted into a form readily accepted as payment for goods and services. Liquidity Premium -- An adjustment to a real interest rate to compensate for the direct relationship between uncertainty and the duration of a debt contract. M 1 -- A narrow money supply measure that includes currency in circulation and the value of demand deposits.

M 2 -- A broad money supply measure that includes currency, demand deposits, and the value of time deposits. Marginal Propensity to Consume --The fraction of each additional dollar of income devoted to consumption expenditure. Marginal Propensity to Spend -- The fraction of each additional dollar of income devoted to any type of spending i. Market -- A place or institution where buyers and sellers come together and exchange factor inputs or final goods and services.

A market is one of several types of economic rationing systems. Money Market Instrument -- A short term less than 10 years debt instrument. Money Multiplier -- The relationship between changes in the monetary base and the money supply. Monetary Base -- Also known as High-powered Money. National Income -- The sum of all types of income wages, net interest, profits, and net rental income earned in a given time period by any type of economic agent individuals or corporation.

Natural Rate of Unemployment -- That rate of unemployment where there is neither upward nor downward pressure on prices. Net Investment -- Investment exclusive of replacement of depreciated capital. Nominal Interest Rate -- The interest rate published as part of a debt contract. Non-Durable Goods --Goods that tend to be immediately consumed or deliver consumption services over a short period of time.

Non-Income Producing Asset --Something of value that does not generate any income or revenue stream. Normal Current Yield -- The ratio between the annual income generated by an asset and its purchase price. Also known as the present value of a perpetuity.

Paasche Index -- A weighted average of prices based on current expenditure patterns. Peak -- A point of transition in the business cycle from expansion to contraction.

Permanent Income -- Expected levels of individual income that guide consumption expenditure decisions.

Personal Income -- The income earned by individual households in a given time period. Potential Output -- A measure of the economy's ability to produce goods and services. Present Value -- The value of a future payment or stream of payments discounted by some appropriate rate of interest. Activity in this market represents direct finance where actual borrowing and lending activity takes place.

Producer -- An economic agent that converts inputs factors of production into output goods and services with the goal of maximizing profits from production and sale of those goods and services. Profits -- The difference between sales revenue and the costs of production.. The Quantity Equation -- Also known as the Equation of Exchange , an identity relating the amount of money in circulation to the price level and level of output in an aggregate economy.

Rate of Time Preference -- The equivalent of a personal interest or discount rate. The measure by which individuals compare current and future economic activity. Real Interest Rate -- An interest rate that has been adjusted for changes in the price level or changes in purchasing power over some time period. Relative Price -- A ratio of any two prices or one particular price compared to a price index.

Risk -- A measure of uncertainty about the value of an asset or the benefits of some economic activity. Risk Premium -- An adjustment to a real interest rate to compensate for uncertainty in the ability of a borrower to service a loan. Savings -- The difference between income and expenditure in the current time period.

Scarcity -- A physical or economic condition where the quantity desired of a good or service exceeds the availability of that good or service in the absence of a rationing system.

Gross Domestic Product (GDP)

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A Glossary of Macroeconomics Terms The Accelerator -- A parameter that defines the relationship between national income and required capital stock. An Asset -- Anything of value owned by an individual, institution or economic agent.

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(G) Expenditures by government for goods and services tat government consumes in providing public goods and services that government consumes in providing public goods and for public (social) capital that has a long lifetime; the expenditures of all governments in .

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Start studying AP Macroeconomics Terms. Learn vocabulary, terms, and more with flashcards, games, and other study tools. Macroeconomics, in its most basic sense, is the branch of economics that deals with the structure, performance, behavior and decision-making of the whole, or aggregate, economy, instead of focusing on individual markets. Meanwhile, microeconomics looks at economic tendencies, or what can happen when individuals make certain choices.

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Macroeconomics. The subdivision of the discipline of economics that studies and strives to explain the functioning of the economy as a whole -- the total output of the economy, the overall level of employment or unemployment, movements in the average level of prices (inflation or deflation), total savings and investment, total consumption and so on. Macroeconomics definition is - a study of economics in terms of whole systems especially with reference to general levels of output and income and to the interrelations among sectors of the economy.