Macroeconomic Concepts and Interactions Quiz

Government spending contributes to the overall GDP by representing the total expenditures made by the government.

The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services, indicating inflation rate.

A trade deficit occurs when a nation's imports surpass its exports in terms of value.

Recessions are marked by economic contractions, often resulting in increased unemployment.

Fiscal policy, involving government spending and taxation, is distinct from monetary policy, which includes tools like interest rates and money supply.

Unemployment rate is calculated by dividing the number of unemployed individuals by the total labor force.

The Federal Reserve manages the money supply to promote economic stability and growth.

Fiscal policy pertains to government financial actions, while monetary policy involves controlling the economy through interest rates and money supply.

The Phillips curve illustrates an inverse relationship between inflation and unemployment, suggesting that as one decreases, the other tends to increase.

The Laffer Curve demonstrates the relationship between tax rates and government tax revenue, suggesting that there is an optimal tax rate for maximizing revenue.

The multiplier effect demonstrates how an initial change in spending can have a larger impact on overall economic activity.

Crowding out occurs when increased government borrowing leads to reduced private sector investment.