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28 Cards in this Set

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business cycles
alternating rises and declines in the level of economic activity, sometime over several years
peak
business activity has reached a temporary maximum
recession
a period of decline in total output, income, and employment
trough
output and employment "bottom out" at their lowest levels
expansion
a period in which real GDP, income, and employment rise
labor force
people who are able and willing to work
unemployment rate
the percentage of the labor force unemployed
discouraged workers
works who, after unsuccessfully seek employment, become discouraged and drop out of the labor force
frictional unemployment
workers who are either searching for jobs or waiting to take jobs in the near future
structural unemployment
unemployment of workers whose skills are not demanded by employers, who lack sufficient skill to obtain employment, or who cannot easily move to locations where jobs are available
cyclical unemployment
unemployment that is caused by a decline in total spending
full-employment rate of unemployment; NRU
the unemployment rate at which there is no cyclical unemployment of the labor force
potential output
the real GDP that occurs when the economy is "fully employed"
GDP gap
the difference between actual and potential GDP
Okun's law
indicates that for every 1 percentage point by which the actual unemployment rate exceeds the natural rate, a negative GDP gap of about 2 percent occurs
Consumer Price Index (CPI)
an index that measures the prices of a fixed "market basket" of some 300 goods and services bought by a "typical" consumer
demand-pull inflation
"too much spending for too few goods"
cost-push inflation
explains rising prices in terms of factors that rise per-unit production costs at each level of spending
per-unit production costs
the average cost of a particular level of output
nominal income
the number of dollars received as wages, rent, interest, or profits
real income
a measure of the amount of goods and services nominal income can buy
unanticipated inflation
cause real income and wealth to be redistributed, harming some and benefiting others
anticipated inflation
situations in which people see an inflation coming in advance
cost-of-living adjustments (COLAs)
an automatic increase in the incomes of workers when inflation occurs
real interest rate
the percentage increase in purchasing power that the borrower pays the lender
nominal interest rate
the percentage increase in money that the borrower pays the lender
deflation
declines in the price level
hyperinflation
extraordinarily rapid inflation