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25 Cards in this Set
- Front
- Back
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business cycles
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the business cycle means alternating periods of prosperity and recession even if the long term trends show economic growth
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peak
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is the maximum level of real output at the star of the cycle
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recession
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which is a period of decline
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trough
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when real output is no longer declining
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expansion
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or recovery in which the economy experiences an increase in real output
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unemployment
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one of the twin problems arising from the economic instability of the business cycle
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unemployment rate
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is calculated by dividing the number of person in teh labor force who are unemployed by the total number of persons in the labor force
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discouraged workers
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who have left the labor force are not counted as unemployed
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frictional unemployment
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is due to the changes in technology and in the types of goods and services consumers wish to buy
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cyclical unemployment
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arises from a decline in total spending in the economy that pushes an economy into an economic downturn or recession
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full employment unemployment rat or the natural rat of unemployment
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is the sum of frictional and structural unemployment and is achieved when cyclical unemployment is zero
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potential output
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the real output of the economy is = to potential output
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GDP gap
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difference between actual and potential GDP
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Okuns law
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predicts that for every 1% that actual unemployment rate exceeds the natural rate of unemployment there is a negative GDP gap of about 2%
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consumer price index
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the primary measure of inflation in the US
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inflation
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is an increase in the general level of prices in the economy .
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the rule of 70
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can be used to calculate the number of years it will take for the price level to double at any given rate of inflation
70/ rate of inflation |
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demand pull inflation
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is the result of excess total spending in the economy
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cost push inflation
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is the result of factors that raise per unit production cost . or the average cost is found by dividing the total cost of the resource inputs by the amount of output produced
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real income
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is determined by dividing nominal income by the price level expressed in hundredths
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unanticipated inflation
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hurts fixed income receivers savers and creditors because it lowers the real valu of their assets
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cost of living adjustment
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in their pay when the cpi RIses
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anticipated inflation
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people can adjust their nominal income to reflect the expected rise in the price level
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interest rate
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an inflation premium the expected rat of inflation is added to the real interest rate
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deflation
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decline in the price level
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