chapter 11, successes & difficulties in the market economy Flashcards
the three criticism of the market economy mentioned in the text
complaint about business fluctuation
inflation of money and prices
the market is a competitive economic system
recurrent fluctuations in the level of economic activity
business cycle
four maim components of a cycle
expansion, peak, recession, and trough
industries increase the amount of goods they produce
expansion
rises noticeably after an expansion
GDP (gross domestic product)
the value of all finished goods and services produced within a country during a year’s time
GDP
refers to the value of all finished goods and services produced by a nations citizens during a year’s time
GNP (gross national product)
the high point of a business cycle
peak
a period of economic decline
recession
lowest point in a business cycle
trough
components of the economy that normally change before the rest of the economy
leading indicators
two types of inflation
demand-pull
cost-push
difference between demand-pull and cost-push inflation
demand pull is caused when the demand becomes greater than the supply, resulting in shortages.
cost-push is triggered when businesses face rising production cost, forcing them to increase the prices they charge for their goods
index based on the average price consumers have to pay to purchase a specific good
CPI (consumer price index)
prices are compared to ____ (1982-84)
base period
