Macroeconomic terms

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Macroeconomic Terms

Describe the following terms in your words.

Term Definition
Gross Domestic Product (GDP)
The value of all of the goods and services of a nation in a year.
Real GDP The value of all of the goods and services based on inflation of a nation in a year.

Nominal GDP Market value of all goods and services of a nation in a year, not based on inflation.

Unemployment rate The number of all of the unemployed by the number of people in the workforce.

Inflation rate The rate that the prices of goods and services are rising.

Fiscal Policy The governmental policies which adjust spending.

Monetary Policy The governmental policies that help to control the economy. This is done by adjusting the
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The aggregate demand curve slopes downward because of the

Real-balance, interest rate and open economy effects


According to the real-balance effect, an increase in the price level

Reduces an individual 's expenditures due to a decrease in the real value of cash balances


According to the interest rate effect, an increase in the price level


The relationship between the MPC and the MPS indicates that the entire increase in household disposable income

is distributed between consumption and saving.


Planned real investment is determined by the

rate of interest


What won 't cause the planned investment function to shift rightward?

A decrease in the interest rate


An increase in the interest rate causes

a decrease in the amount of real planned investment


In the Keynesian model equilibrium national income

equals planned consumption, investment, government, and net export expenditures


If real GDP falls below total planned expenditures the economy will
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