Fundamental Concepts in Macroeconomics Quiz

GDP measures the total value of goods and services produced in a country, while the unemployment rate is a measure of labor market conditions.

CPI is a measure that examines the weighted average of prices of a basket of consumer goods and services, used to assess inflation.

Monetary policy aims to control inflation, ensure price stability, and support economic growth and employment.

The Gini coefficient quantifies the extent of income distribution inequality within a population.

Opportunity cost measures the value of the next best alternative foregone when a decision is made.

Fiscal policy involves government spending and taxation to influence economic conditions.

The Phillips Curve suggests an inverse relationship between inflation and unemployment rates in an economy.

In a liquidity trap, interest rates are low and savings are high, making monetary policy ineffective in stimulating economic growth.

GDP is calculated as the sum of consumption (C), investment (I), government spending (G), and net exports (NX).

The Federal Reserve, often referred to as the Fed, is the central bank of the United States responsible for setting monetary policy.

During a recession, consumer spending typically decreases, leading to reduced economic activity.

Crowding out occurs when increased government spending reduces available resources for private investment.

Central banks control inflation by managing the money supply and influencing interest rates.

Keynesian economics advocates for government intervention, particularly during economic downturns, to stabilize economic activity and employment.

Deflation is a decrease in the general price level of goods and services within an economy, opposite to inflation.