Chapter 6 Flashcards
what is a business cycle?
alternating periods of economic growth and contraction which can be measured by changes in real GDP.
what is Peak?
the phase of the business cycle in which real GDP reaches its max after rising during a recovery
what is a recession?
a downturn in the business cycle during which real GDP declines and the unemployment rate rises. also called a contraction
what is a trough?
the phase of the business cycle in which real GDP reaches its minimum after falling during a recession
what is recovery?
an upturn in the business cycle during which real GDP rises also called an expansion
what is economic growth?
an expansion in national output measured by the annual percentage increase in a nations real GDP?
T or F We do not value economic growth as one of our nation’s economic goals because it increases our standard of living - it creates a bigger “economic pie”
False
what are leading indicators?
variables that changes before real GDP changes
what are coincident indicators?
variables that change at the same time that real GDP changes
what are lagging indicators?
variables that change after real GDP changes
what is the equation for GDP?
GDP = C + I G + (X - M)
what is an unemployment rate?
the percentage of people in the civilian labor force who are without jobs and are actively seeking jobs
what is the civilian labor force?
the number of people 16 years of age and older who are employed or are actively seeking a job, excluding armed forces, homemakers, discouraged workers, and other persons not in the workforce
what is the equation for calculating the unemployment rate?
Unemployment rate = (unemployed / civilian labor force)100
what is a discouraged worker?
a person who wants to work, but who has given up searching for work because he or she believes there will be no job offers
what is frictional unemployment?
unemployment caused by the normal search time required by workers with marketable skills who are changing jobs, initially entering the labor force, reentering the labor force, or seasonally unemployed
what is structural unemployment?
unemployment caused by a mismatch of the skills of workers out of work and the skills required for existing job opportunities
what is cyclical unemployment?
unemployment caused by the lack of jobs during a recession
what is full employment?
the situation in which an economy operates at an unemployment rate equal to the sum of the frictional and structural unemployment rates. Also called the natural rate of unemployment
what is a GDP gap?
the difference between actual real GDP and potential or full-employment real GDP
what is the equation for GDP gap?
GDP gap = actual real GDP - potential real GDP
T or F the gap between actual and potential real GDP measures the monetary losses of real goods and services to the nation from operating at less than full employment
True
