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36 Cards in this Set
- Front
- Back
the business cycle |
alternating increases and decreases in economic activity over time |
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phases of the business cycle |
-peak -recession -trough -expansion |
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peak |
is the highest point between the end of an economic expansion and the start of a contraction in a business cycle. The peak of the cycle refers to the last month before several key economic indicators, such as employment and new housing starts, begin to fall.
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recession |
a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales."
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trough |
a low turning point or a local minimum of a business cycle. The time evolution of many variables of economics exhibit a wave like behavior with local maxima (peaks) followed by local minima (troughs). ... The period of the business cycle in which real GDP is increasing is called the expansion.
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expansion |
hen the economy moves from a trough to a peak. It is a period when the level of business activity surges and gross domestic product (GDP) expands until it reaches a peak. A period of expansion is also known as an economic recovery.
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business cycle fluctuations |
-economic shocks -prices are sticky -economic response entails decrease in output and employment |
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economic shocks examples |
-nine 11 -supply shock; is extreme price raise -can be negative or positive |
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prices are "sticky" downwards example |
it cost money to change prices |
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causes of shock |
-irregular innovation -productivity changes -monetary factors -political events - financial instability |
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irregular innovation |
..... |
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monetary factors
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.... |
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capital goods |
typically for business; trucks, equipment
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consumer goods |
microwaves, washer, dryer |
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what are two durable goods most affected by the business cylce |
capital and consumer goods |
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non durable consumer goods that are affected less |
services and food and clothing |
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criticisms of unemployment
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-involuntary part-time workers counted as full time -Discouraged workers are not counted as unemployed |
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Frictional unemployment |
individuals searching for jobs or waiting to take jobs soon |
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structural unemployment |
occurs due to changes in the structure of the demand for labor |
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cyclical unemployment |
caused by the recession phase of the business cycle |
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natural rate of unemployment |
is a combination of frictional, structural and surplusunemployment. Even a healthy economy will have this level ofunemployment because workers are always coming and going, looking for better jobs.
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can natural unemployment vary over time? |
yes |
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why can natural unemployment over time? |
-demographic changes -changing job search methods -public policy changes |
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can actual unemployment go above or below the natural rate of unemployment? |
yes its better to be lower |
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GDP gap equation |
GDP gap= actual GDP - potential GDP |
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can a GDP gap be negative or positive ? |
yes |
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Okun's Law |
every 1% of cyclical unemployment creates a 2% GDP gap |
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GDP gap |
is an indicator of the difference between the actual output of an economy and the maximum potential output of the economy, expressed as a percentage of gross domestic product (GDP).
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unequal burdens |
-occupation - age -race and ethnicity -gender -education -duration |
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loss of skills and loss of self-respect is a economic ...? |
costs |
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plummeting morale is a economic ...? |
costs |
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family disintegration is a economic ...? |
costs |
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poverty and reduced hopeis a economic ...? |
costs |
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heightened racial and ethnic tensionsis a economic ...? |
costs |
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suicideis a economic ...? |
costs |
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can lead to violent social and political changeis a economic ...? |
costs |