Chapter 5.

Economic Growth - in short run, an increase in real GDP, in the long run, an increase in productive capacity.

Deflation -  a sustained fall in the general price level.

Balance of Payments - a record of money flows coming in and going out of the country.

Government Policy:

-Economic Growth

-Employment and Unemployment

-Inflation(an increase in price level)

-Balance of Payments(trade)

-Income Redistribution(transfer money from rich to poor)

Hyperinflation - more than 50%

Current Account Deficit - when more money is leaving than receiving.

Stable inflation- 1% or 2%

Unemployment Rate measured by formula:

the unemployment *100% / labour force

Labour Force - people who are employed and unemployed.

UNEMPLOYMENT:

-Cyclical (lack of demand)

-Structural(because of decline of certain industries and occupations due to change on demand and supply)

-Frictional(in between jobs)

Types of Inflation:

-Demand-pull

-Cost-push