Macroeconomics - Midterm - Definitions and Concepts
I. DEFINITIONS
1. Macro Economics: Based on the definition we learned during class, Macro Economics studies the behavior of the aggregate economy. It looks at the economy as a whole and analyzes phenomena such as Gross domestic product (GDP), unemployment, national income, inflation, price levels or rate of growth.
2. Micro Economics: It studies the market behavior of consumers and firms to understand the decision-making process of firms and households. In opposition to macroeconomics, microeconomics looks at the smaller picture and focuses on how individual businesses decide how much of something to produce and how much to sell it for. It focuses on patterns of supply and demand and the determination of price and output in individual markets.
3. Deficit: Deficit corresponds to the expenses that exceed income or when costs are higher than revenues. It is the opposite of surplus. For example, if the US exports $3 billion and imports $4 billion in 2012 it has a trade deficit of $1 billion for the year 2012.
4. Real Capital: Real capital corresponds to fix assets in accounting. It is capital, such as equipment and machinery, which is used to produce goods. Real capital is distinguished from financial capital, which corresponds to funds available to acquire real capital. Real capital appears on the asset side of the balance sheet, while financial capital appears in either the liabilities section or the shareholder’s equity section.
5. Debt: It is a certain amount of money borrowed by one party from another. Bonds, loans and commercial paper are examples of debt.
6. Consumer price index: It is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. The CPI is calculated by taking price changes for each item in the predetermined basket of goods and averaging them; the goods are weighted according to their importance. Changes in CPI are used to assess price changes
1. Macro Economics: Based on the definition we learned during class, Macro Economics studies the behavior of the aggregate economy. It looks at the economy as a whole and analyzes phenomena such as Gross domestic product (GDP), unemployment, national income, inflation, price levels or rate of growth.
2. Micro Economics: It studies the market behavior of consumers and firms to understand the decision-making process of firms and households. In opposition to macroeconomics, microeconomics looks at the smaller picture and focuses on how individual businesses decide how much of something to produce and how much to sell it for. It focuses on patterns of supply and demand and the determination of price and output in individual markets.
3. Deficit: Deficit corresponds to the expenses that exceed income or when costs are higher than revenues. It is the opposite of surplus. For example, if the US exports $3 billion and imports $4 billion in 2012 it has a trade deficit of $1 billion for the year 2012.
4. Real Capital: Real capital corresponds to fix assets in accounting. It is capital, such as equipment and machinery, which is used to produce goods. Real capital is distinguished from financial capital, which corresponds to funds available to acquire real capital. Real capital appears on the asset side of the balance sheet, while financial capital appears in either the liabilities section or the shareholder’s equity section.
5. Debt: It is a certain amount of money borrowed by one party from another. Bonds, loans and commercial paper are examples of debt.
6. Consumer price index: It is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. The CPI is calculated by taking price changes for each item in the predetermined basket of goods and averaging them; the goods are weighted according to their importance. Changes in CPI are used to assess price changes