Economics and Finance Flashcards

What is inflation?

Answer: A sustained increase in the general price level of goods and services, reducing purchasing power

Inflation is the rate at which the general price level of goods and services rises over time, eroding the purchasing power of money.

What is the role of the Federal Reserve (the Fed)?

Answer: To serve as the central bank of the U.S., managing monetary policy, interest rates, and financial stability

The Federal Reserve is the U.S. central banking system, responsible for setting monetary policy, regulating banks, maintaining financial stability, and managing the money supply.

What is a credit score and why does it matter?

Answer: A numerical rating that reflects a person's creditworthiness, used by lenders to decide loan terms

A credit score (typically ranging from 300–850) summarizes a person's credit history and is used by lenders to determine loan eligibility and interest rates.

What is gross domestic product (GDP)?

Answer: The total monetary value of all goods and services produced within a country in a given period

GDP is the broadest measure of a country's economic output — the total value of goods and services produced within its borders over a specific time period.

What is the difference between a recession and a depression?

Answer: A recession is a period of significant economic decline lasting at least two quarters, while a depression is a prolonged and severe recession

A recession is typically defined as two or more consecutive quarters of declining GDP, while a depression is a much longer, deeper downturn with widespread unemployment and economic hardship.

What is a budget deficit?

Answer: When a government's spending exceeds its revenue in a given period, requiring borrowing to cover the gap

A budget deficit occurs when a government spends more than it collects in revenue during a fiscal year, typically requiring it to borrow money, increasing the national debt.