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28 Cards in this Set
- Front
- Back
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business cycles
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alternating rises and declines in the level of economic activity, sometime over several years
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peak
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business activity has reached a temporary maximum
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recession
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a period of decline in total output, income, and employment
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trough
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output and employment "bottom out" at their lowest levels
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expansion
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a period in which real GDP, income, and employment rise
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labor force
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people who are able and willing to work
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unemployment rate
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the percentage of the labor force unemployed
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discouraged workers
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works who, after unsuccessfully seek employment, become discouraged and drop out of the labor force
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frictional unemployment
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workers who are either searching for jobs or waiting to take jobs in the near future
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structural unemployment
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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
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cyclical unemployment
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unemployment that is caused by a decline in total spending
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full-employment rate of unemployment; NRU
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the unemployment rate at which there is no cyclical unemployment of the labor force
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potential output
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the real GDP that occurs when the economy is "fully employed"
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GDP gap
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the difference between actual and potential GDP
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Okun's law
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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
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Consumer Price Index (CPI)
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an index that measures the prices of a fixed "market basket" of some 300 goods and services bought by a "typical" consumer
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demand-pull inflation
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"too much spending for too few goods"
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cost-push inflation
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explains rising prices in terms of factors that rise per-unit production costs at each level of spending
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per-unit production costs
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the average cost of a particular level of output
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nominal income
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the number of dollars received as wages, rent, interest, or profits
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real income
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a measure of the amount of goods and services nominal income can buy
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unanticipated inflation
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cause real income and wealth to be redistributed, harming some and benefiting others
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anticipated inflation
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situations in which people see an inflation coming in advance
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cost-of-living adjustments (COLAs)
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an automatic increase in the incomes of workers when inflation occurs
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real interest rate
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the percentage increase in purchasing power that the borrower pays the lender
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nominal interest rate
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the percentage increase in money that the borrower pays the lender
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deflation
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declines in the price level
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hyperinflation
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extraordinarily rapid inflation
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