Adaptive expectationsIn economics, adaptive expectations is a hypothesized process by which people form their expectations about what will happen in the future based on what has happened in the past. For example, if people want to create an expectation of the inflation rate in the future, they can refer to past inflation rates to infer some consistencies and could derive a more accurate expectation the more years they consider.
InflationIn economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduction in the purchasing power of money. The opposite of inflation is deflation, a decrease in the general price level of goods and services. The common measure of inflation is the inflation rate, the annualized percentage change in a general price index.
Monetary policyMonetary policy is the policy adopted by the monetary authority of a nation to affect monetary and other financial conditions to accomplish broader objectives like high employment and price stability (normally interpreted as a low and stable rate of inflation). Further purposes of a monetary policy may be to contribute to economic stability or to maintain predictable exchange rates with other currencies.
Cost-push inflationCost-push inflation is a purported type of inflation caused by increases in the cost of important goods or services where no suitable alternative is available. As businesses face higher prices for underlying inputs, they are forced to increase prices of their outputs. It is contrasted with the theory of demand-pull inflation. Both accounts of inflation have at various times been put forward, with inconclusive evidence as to which explanation is superior.
Keynesian economicsKeynesian economics (ˈkeɪnziən ; sometimes Keynesianism, named after British economist John Maynard Keynes) are the various macroeconomic theories and models of how aggregate demand (total spending in the economy) strongly influences economic output and inflation. In the Keynesian view, aggregate demand does not necessarily equal the productive capacity of the economy. Instead, it is influenced by a host of factors – sometimes behaving erratically – affecting production, employment, and inflation.
Milton FriedmanMilton Friedman (ˈfriːdmən; July 31, 1912 – November 16, 2006) was an American economist and statistician who received the 1976 Nobel Memorial Prize in Economic Sciences for his research on consumption analysis, monetary history and theory and the complexity of stabilization policy. With George Stigler and others, Friedman was among the intellectual leaders of the Chicago school of economics, a neoclassical school of economic thought associated with the work of the faculty at the University of Chicago that rejected Keynesianism in favor of monetarism until the mid-1970s, when it turned to new classical macroeconomics heavily based on the concept of rational expectations.
RecessionIn economics, a recession is a business cycle contraction that occurs when there is a general decline in economic activity. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be triggered by various events, such as a financial crisis, an external trade shock, an adverse supply shock, the bursting of an economic bubble, or a large-scale anthropogenic or natural disaster (e.g. a pandemic).
Great DepressionThe Great Depression (19291939) was an economic shock that impacted most countries across the world. It was a period of economic depression that became evident after a major fall in stock prices in the United States. The economic contagion began around September 1929 and led to the Wall Street stock market crash of October 24 (Black Thursday). It was the longest, deepest, and most widespread depression of the 20th century. Between 1929 and 1932, worldwide gross domestic product (GDP) fell by an estimated 15%.
UnemploymentUnemployment, according to the OECD (Organisation for Economic Co-operation and Development), is people above a specified age (usually 15) not being in paid employment or self-employment but currently available for work during the reference period. Unemployment is measured by the unemployment rate, which is the number of people who are unemployed as a percentage of the labour force (the total number of people employed added to those unemployed).
Aggregate demandIn macroeconomics, aggregate demand (AD) or domestic final demand (DFD) is the total demand for final goods and services in an economy at a given time. It is often called effective demand, though at other times this term is distinguished. This is the demand for the gross domestic product of a country. It specifies the amount of goods and services that will be purchased at all possible price levels. Consumer spending, investment, corporate and government expenditure, and net exports make up the aggregate demand.
