Chapter - 4 Flashcards
Canada’s interactions with the rest of the world which are captured here in the current account and capital account
balance of payments
The recurrence of periods of expansion and recession in economic activity. Each cycle is expected to move through five phases – the trough, recovery, expansion, peak, contraction (recession). Given an understanding of the relationship between the business cycle and security prices an investor or fund manager would select an asset mix to maximize returns.
business cycle
Statistical data that, on average, change at approximately the same time and in the same direction as the economy as a whole
coincident indicators
Price index which measures the cost of living by measuring the prices of a given basket of goods. It is often used as an indicator of inflation.
Consumer Price Index (CPI)
A type of inflation that develops due to an increase in the costs of production. For example, an increase in the price of oil may contribute to higher input costs for a company and could lead to higher inflation.
cost-push inflation
The amount of unemployment that rises when the economy softens, firms’ demand for labour moderates, and some firms lay off workers in response to lower sales. It drops when the economy strengthens again.
cyclical unemployment
A sustained fall in prices where the consumer price index is negative
deflation
The quantity demanded of a good or service based on a particular price during a given period. The lower the price, the higher the demand.
demand
A type of inflation that develops when continued consumer demand pushes prices higher
demand-pull inflation
Individuals that are available and willing to work but cannot find jobs and have not made specific efforts to find a job within the previous month
discouraged workers
A decline in the rate at which prices rise – i.e., a decrease in the rate of inflation. Prices are still rising, but at a slower rate
disinflation
Statistics or data series that are used to analyze business conditions and current economic activity
economic indicators
A social science that is concerned with an understanding of production, distribution, and consumption of goods and services
economics
The price at which the quantity demanded equals the quantity supplied
equilibrium price
The price at which one currency exchanges for another
exchange rate
A finished product, one that is purchased by the ultimate end user
final good
Unemployment that results from normal labour turnover, from people entering and leaving the workforce and from the ongoing creation and destruction of jobs
frictional unemployment
The value of all goods and services produced in a country in a year
gross domestic product (GDP)
A generalized, sustained trend of rising prices
inflation
The proportion of the loan calculated as interest that is payable by the borrower. Also referred to as the ___.
interest rates, cost of credit
The sum of the population aged 15 years and over who are either employed or unemployed
labour force
A selection of statistical data, that on average, indicate highs and lows in the business cycle behind the economy as a whole. These relate to business expenditures for new plant and equipment, consumers’ instalment credit, short-term business loans, the overall value of manufacturing and trade inventories.
lagging indicators
A selection of statistical data that, on average, indicate highs and lows in the business cycle ahead of the economy as a whole. These relate to employment, capital investment, business starts and failures, profits, stock prices, inventory adjustment, housing starts and certain commodity prices.
leading indicators
It focuses on the performance of the economy as a whole. It looks at the broader picture and to the challenges facing society as a result of the limited amounts of natural resources, human effort and skills, and technology.
macroeconomics
An economic system where the decisions regarding investment, production, and distribution of goods and services are guided by the price signals created by the forces of supply and demand
market economy
Analyzes the market behaviour of individual consumers and firms, how prices are determined, and how prices determine the production, distribution, and use of goods and services
microeconomics
Also called the ___. At this level of unemployment, the economy is thought to be operating at close to its full potential or capacity.
natural unemployment rate, full employment unemployment rate
Interest rate falls below zero. In a negative interest rate environment, banks may charge their customers for keeping deposits and banks may pay customers to take a loan.
negative interest rates
Gross domestic product based on prices prevailing in the same year not corrected for inflation. Also referred to as ___ or ___.
nominal gross domestic product, current dollar, chained dollar GDP
The quoted or stated rate on an investment or a loan. This rate allows for comparisons but does not take into account the effects of inflation.
nominal interest rate
The share of the working-age population (15 and older) that is in the labour market, either working or looking for work. Also, the limit on the return paid by an issuer to an investor is known as the ___.
participation rate
A graph showing the relationship between inflation and unemployment. The theory states that unemployment can be reduced in the short run by increasing the price level (inflation) at a faster rate. Conversely, inflation can be lowered at the cost of possibly increased unemployment and slower economic growth.
Phillips curve
The amount of output per worker used as a measure of efficiency with which people and capital are combined in the output of the economy. Productivity gains lead to improvements in the standard of living, because as labour, capital, etc. produce more, they generate greater income.
productivity
Gross Domestic Product adjusted for changes in the price level. Also referred to as ___.
real gross domestic product, constant dollar GDP
The nominal rate of interest minus the percentage change in the Consumer Price Index (i.e., the rate of inflation)
real interest rate
Unemployment that results from a company or industry that only operates during specific seasons of the year
seasonal unemployment
Unemployment that results when workers are unable to find work or fill available jobs because they lack the necessary skills, do not live where the jobs are available, or decide not to work at the wage rate offered by the market
structural unemployment
The quantity supplied of a good or service based on a particular price during a given period of time. The higher the price of the good or service, the greater the quantity of supply.
supply
People who are working part-time, often at jobs that do not make good use of their skills, when they would rather be working full-time
underemployed
The percentage of the work force that is looking for work but unable to find jobs
unemployment rate
