IB Economics 3.3 Macroeconomic Objectives Key Definitions

The total quantity of real output that all buyers in an economy (consumers, businesses, the government, and foreigners) are willing to purchase over a specific time period, at all possible price levels, ceteris paribus.

A measure of the cost of living carried out by comparing the value of a basket of goods and services in a given year to a base year.

A type of inflation caused by rising production costs, such as higher wages or input prices, which reduce aggregate supply and push the price level up.

Cyclical unemployment occurs during economic downturns when demand for goods and services falls, leading to job losses.

A sustained decrease in the general price level of goods and services in an economy over time, typically indicated by a negative inflation rate.

A type of inflation caused by an increase in aggregate demand that exceeds aggregate supply at the full employment level.

A slowdown in the rate of inflation, meaning prices are still rising but at a slower pace compared to previous periods.

An increase in a country's real output (real GDP) over a period time.

Frictional unemployment occurs when people are temporarily between jobs or entering the workforce for the first time.

Key goals of governments in achieving economic stability include sustainable growth, low inflation, low unemployment, balanced trade, and income equality.

The level of unemployment that persists even when the economy is operating at full-employment. It consists of the sum of structural, frictional, and seasonal unemployment.

Curve that illustrates all possible combinations of two goods that an economy can produce at maximum output when using all available resources and current technology efficiently.

Seasonal unemployment arises when jobs are only available during certain times of the year.

Structural unemployment happens when there is a mismatch between workers’ skills and available jobs.

When people of working age (16-65) who are actively seeking and able to work, but are not employed.

The number of unemployed people expressed as a percentage of the labor force.