Economics Vocab Ch 7

Front 1

Economic Growth

Back 1

An increase of real output (gross domestic product) or real output per capita.

Front 2

Real GDP per capita

Back 2

Inflation-adjusted output per person; real GDP/population.

Front 3

Rule of 70

Back 3

A method for determining the number of years it will take for some measure to double, given its annual percentage increase. Example: To determine the number of years it will take for the price level to double, divide 70 by the annual rate of inflation.

Front 4

Productivity

Back 4

A measure of average output or real output per unit of input. For example, the productivity of labor is determined by dividing real output by hours of work.

Front 5

Business Cycles

Back 5

Recurring increases and decreases in the level of economic activity over periods of years; consists of peak, recession, trough, and expansion phases.

Front 6

Peak

Back 6

The point in a business cycle at which business activity has reached a temporary maximum; the economy is near or at full employment and the level of real output is at or very close to the economy's capacity.

Front 7

Recession

Back 7

A period of declining real GDP, accompanied by lower real income and higher unemployment.

Front 8

Trough

Back 8

depression, output, and unemployment "bottom out" at their lowest levels. may be short lived or quite long

Front 9

Expansion

Back 9

A phase of the business cycle in which real GDP, income, and employment rise.

Front 10

Labor Force

Back 10

Persons 16 years of age and older who are not institutions and who are employed or are unemployed and seeking work.

Front 11

Unemployment Rate

Back 11

The percentage of the labor force unemployed at any time.

Front 12

Discouraged Workers

Back 12

Employees who have left the labor force because they have not been able to find employment.

Front 13

Frictional Unemployment

Back 13

A type of unemployment caused by workers voluntarily changing jobs and by temporary layoffs; unemployed workers between jobs.

Front 14

Structural Unemployment

Back 14

Unemployment of workers whose skills are not demanded by employers, who lack sufficient skills to obtain employment, or who cannot easily move to locations where jobs are available.

Front 15

Cyclical Unemployment

Back 15

A type of unemployment caused by insufficient total spending (or by insufficient aggregate demand).

Front 16

Full-employment rate of Unemployment

Back 16

The unemployment rate at which there is no cyclical unemployment of the labor force; equal to between 4 and 5 percent in the United States because some frictional and structural unemployment is unavoidable.

Front 17

Natural rate of Unemployment (NRU)

Back 17

The full-employment unemployment rate; the unemployment rate occurring when there is no cyclical unemployment and the economy is achieving its potential output; the unemployment rate at which actual inflation equals expected inflation.

Front 18

Potential Output

Back 18

The real output (GDP) an economy can produce when it fully employs its available resources.

Front 19

GDP gap

Back 19

Actual gross domestic product minus potential output; may be either a positive amount (a positive GDP gap) or a negative amount (a negative GDP gap).

Front 20

Okun's law

Back 20

The generalization that any 1-percentage-point rise in the unemployment rate above the full-employment unemployment rate will increase the GDP gap by 2 percent of the potential output (GDP) of the economy.

Front 21

Inflation

Back 21

A rise in the general level of prices in an economy.

Front 22

Consumer Price Index (CPI)

Back 22

An index that measures the prices of a fixed "market basket" of some 300 goods and services bought by a "typical" consumer.

Front 23

Demanded-pull inflation

Back 23

Increases in the price level (inflation) resulting from an excess of demand over output at the existing price level, caused by an increase in aggregate demand.

Front 24

Cost-push inflation

Back 24

Increases in the price level (inflation) resulting from an increase in resource costs (for example, resulting from an increase in resource costs (for example, raw-material prices) and hence in per-unit production costs; inflation caused by reductions in aggregate supply.