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12 Cards in this Set

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What is economic growth?
An increase in the production of goods and services within a certain time period.
What are the four cycles defined in the Business Cycle?
Peak, recession, trough, and recovery.
What is the unemployment rate formula?
Unemployed divided by the number in Labor Force all times 100.
What are the three types of unemployment? Explain them.
1. Frictional unemployment- temporary, sometimes desirable.
2. Structual unemployment- longer time span, skills aren't marketable.
3. Cyclical unemployment- shifts in business cycle, length can vary.
What is Okun's Law?
For every 1% point that the actual unemployment rate exceeds NRU, there will be negative GDP gap of 2%
What is a GDP Gap?
The difference between Actual GDP and Potential GDP.
How do you calculate inflation rate?
CPI of current year minus one of the previous year then divided by the previous year.
How does inflation impact different population segments?
Losers: fixed incomes, savers and creditors as purchasing power declines.
Unaffected: Social security income, debtors.
What is aggregate demand?
The level of spending that occurs at every price level.
(Prices rise, spending falls)
What is aggregate supply?
The level of real output produced by firms at every price level.
(firms produce more at higher prices)
What is expansionary fiscal policy?
Seeks to improve economy through greater spending/lowering taxes.
What is contrastionary fiscal policy?
Seeks to restrain inflation by decreasing spending/raise taxes.