Self Regulating
the view that in an economy problems such as unemployment would be corrected through the working of the invisible hand and that government attempts to improve the economy's performance would be ineffective at best - and would probably make things worse
Keynesian Economics
a depressed economy is the result of inadequate spending and can be fixed through the use of monetary and fiscal policy
Monetary Policy
policies that use changes in the quantity of money to alter interest rates, which in turn affect the level of overall spending
Fiscal Policy
policies that use changes in taxes and government spending to affect overall spending
Recession
periods of economic downturn when output and employment are falling
(also known as contractions)
Expansion
periods in which economic numbers are following there normal upward trend
(opposite of recession)
(sometimes referred to as a recovery)
Business Cycle
the alternation between recessions and expansions
Business-Cycle Peak
the point at which the economy shifts from expansion to recession
Business-Cycle Trough
the point at which the economy shifts from recession to expansion
Long-Run Economic Growth
the sustained rise in the quantity of goods and services the economy produces
Inflation
a rise in the overall level of prices
Deflation
a fall in the overall level of prices
Price Stability
a situation in which the overall level of prices is changing, if any, only slowly
Open Economy
an economy that trades goods and services with other countries
Trade Deficit
occurs when the value of goods and services bought from foreigners is more than the value of the goods and services it sells them
Trade Surplus
occurs when the value of goods and services sold to foreigners is more than the value of the goods and services it buys from them