Unit 5: Macroeconomics Vocabulary Quiz

Match the following

• Trough

• The phase of the business cycle characterized by a decline in economic activity.

• Contraction

• The lowest point in the business cycle, marking the end of a contraction and the beginning of an expansion.

• Recession

• The highest point in the business cycle when economic activity is at its maximum.

• Peak

• A significant decline in economic activity, typically lasting for a few months, marked by decreased GDP, increased unemployment, and reduced consumer spending.

• Recovery/Expansion:

• The phase of the business cycle where economic activity is increasing, leading to growth and higher employment.

Match the following

• Structural Unemployment

• Unemployment that occurs due to economic downturns or contractions in the business cycle.

• Seasonal Unemployment

• Temporary unemployment that occurs when individuals are between jobs or searching for new employment opportunities

• Unemployment Rate

• Unemployment resulting from a mismatch between the skills of the labor force and the requirements of available jobs.

• Frictional Unemployment

• Unemployment caused by fluctuations in demand for labor based on seasonal factors, such as weather or holidays.

• Cyclical Unemployment

• The percentage of the labor force that is unemployed and actively seeking employment.

Match the following

• Real GDP

• GDP adjusted for inflation or deflation, providing a more accurate measure of economic growth.

• Inflation Rate

• The recurring pattern of economic growth and contraction in a market economy.

• Gross Domestic Product (GDP)

• A measure that examines the average change in prices paid by consumers for a basket of goods and services over time.

• Consumer Price Index (CPI)

• The percentage increase in the general price level of goods and services over a specific period, as measured by the CPI.

• Business Cycle

• The total value of all goods and services produced within a country's borders in a specific time period.

Match the following

• Board of Governors

• The interest rate at which depository institutions (banks) lend reserve balances to each other overnight. It is a key monetary policy tool used by the Federal Reserve to influence the overall interest rates in the economy. Changes in the federal funds rate can impact borrowing costs, investment, and overall economic activity.

• Federal Reserve Districts

• The regional divisions that help the Federal Reserve System carry out its functions, including implementing monetary policy and providing banking services.

• Federal Funds Rate

• The main governing body of the Federal Reserve System. It consists of seven members who are appointed by the President of the United States and confirmed by the Senate. They play a key role in setting monetary policy and supervising and regulating banks.

• The Federal Open Market Committee

• The central banking system of the United States. It was established to provide the country with a safe, flexible, and stable monetary and financial system. The Fed conducts monetary policy, supervises and regulates banks, and provides financial services.

• Federal Reserve System

• The monetary policymaking body of the Federal Reserve System. It is responsible for overseeing the open market operations, which involve buying and selling government securities to influence the money supply and achieve the Federal Reserve's monetary policy goals, including price stability and full employment.

Match the following

• Regressive Tax

• A tax system in which the tax rate increases as the taxable amount (income or wealth) increases. Individuals with higher incomes pay a higher percentage of their income in taxes, while those with lower incomes pay a lower percentage.

• Income Tax

• A tax imposed on an individual's or entity's income, including wages, salaries, profits, interest, dividends, and other sources of earnings. It is a common form of taxation used by governments to generate revenue and is often progressive, with higher-income individuals paying a higher percentage of their income in taxes.

• Progressive Tax

• A tax in which the rate remains constant regardless of the taxpayer's income or financial situation. Everyone, regardless of their income level, pays the same percentage of their income in taxes.

• Capital Gains Tax

• A tax system in which the tax rate decreases as the taxable amount increases. This means that individuals with lower incomes pay a higher percentage of their income in taxes compared to those with higher incomes.

• Proportional tax (Flat tax)

• • A tax imposed on the profit from the sale of an asset, known as a capital gain. This typically applies to investments such as stocks, bonds, real estate, and other assets. The tax is usually based on the difference between the purchase price and the selling price of the asset.

11). Match the following

• Budget Deficit

• The use of government spending and taxation to influence the economy. Governments use this to achieve specific economic goals, such as promoting price stability, full employment, and economic growth.

• Budget Surplus

• Occurs when a government's total revenue exceeds its expenditures during a specific period. In other words, it indicates that the government has more income than it spends.

• National debt

• The total amount of money that a government owes to external creditors and internal bondholders. It accumulates over time as a result of budget deficits, where the government borrows to cover its expenses.

• Monetary policy

• Involves the control and regulation of the money supply by a central bank to achieve economic objectives. This includes influencing interest rates, credit availability, and the overall financial conditions to maintain price stability and support sustainable economic growth. Central banks, like the Federal Reserve, typically implement this.

• Fiscal policy

• Occurs when a government's total expenditures exceed its revenue during a specific period. This implies that the government is spending more money than it is taking in.

Match the following

• Medium of Exchange

• A medium of exchange that is widely accepted in transactions involving goods, services, or the settlement of debts. It serves as a unit of account and a store of value.

• Store of Value

• The cost of borrowing money or the return on investment for lending or saving. It is usually expressed as a percentage and represents the compensation paid by borrowers to lenders or the reward for saving.

• Money

• A standard numerical unit used to measure and compare the value of different goods and services. It provides a consistent measure for expressing prices and helps in comparing the relative value of various items in an economy.

• Unit of Account

• An intermediary instrument or system used to facilitate the sale, purchase, or trade of goods and services. It is a widely accepted form of currency or financial instrument that individuals can use to conduct transactions.

• Interest rates

• An asset or form of wealth that maintains its value over time. It allows individuals to transfer purchasing power from the present to the future. In other words, it can be saved or stored for future use, and its value is expected to remain relatively stable.