Chapter 7 – Business Cycles, Unemployment, And Inflation

Question 0

Business cycle

Answer 0

Recurring increases and decreases in the level of economic activity over periods of years.

Question 1

Economic theory

Answer 1

Deriving economic principles from relevant economic facts; an economic principle.

Question 2

Peak

Answer 2

A phase in the business cycle during which the economy is at full employment and the level of real output is at or very close to the economies capacity.

Question 3

Recession

Answer 3

A period of decline in total output, income, and employment.

Question 4

Trough

Answer 4

The points during a recession or depression when output and employment reach their lowest levels.

Question 5

Expansion

Answer 5

The phase of the business cycle during which output and employment rise toward full employment.

Question 6

Productivity

Answer 6

A measure of the average output or real output per unit of input.

Question 7

Labor force

Answer 7

People 15 years of age and older who are not in institutions and who are employed, or are unemployed and seeking work.

Question 8

Unemployment rate

Answer 8

The percentage of the labor force that is unemployed at any time.

Question 9

Discouraged workers

Answer 9

People who have left the labor force because they have not been able to find employment

Question 10

Frictional unemployment

Answer 10

A type of unemployment caused by workers voluntarily changing jobs and my temporary layoff; unemployed workers between jobs.

Question 11

Structural unemployment

Answer 11

Unemployment of workers who skills are not demanded by employers, who lack sufficient skills to obtain employment, or who cannot easily move to locations where jobs are available.

Question 12

Cyclical unemployment

Answer 12

Unemployment caused by a decline in total spending or by insufficient aggregate demand.

Question 13

Seasonal unemployment

Answer 13

Unemployment caused by seasonal factors.

Question 14

Natural rate of unemployment or NRU

Answer 14

The unemployment rate that occurs when no cyclical unemployment exists and the economy is achieving its potential output.

Question 15

Potential GDP

Answer 15

The real output an economy can produce when it fully employs it’s available resources

Question 16

GDP gap

Answer 16

The amount by which actual GDP falls below potential GDP.

Question 17

Correlation

Answer 17

A systematic undependable association between two sets of data; does not necessarily indicate causation.

Question 18

Okun’s Law

Answer 18

The generalization that any one percentage point rise in an employment rate above the natural rate of unemployment will decrease GDP by 2% of economies potential GDP.

Question 19

Inflation

Answer 19

A continual rise in the general level of prices in an economy.

Question 20

Consumer price index or CPI

Answer 20

And index that measures the prices of a fixed market basket of goods and services that is brought by typical consumer.

Question 21

Demand pull inflation

Answer 21

Increases in the price level caused by an excess of total spending beyond the economy’s capacity to produce.

Question 22

Cost push inflation

Answer 22

Increases in the price level resulting from an increase in resource costs and hence in the per unit production cost.

Question 23

Per unit production cost

Answer 23

The average production cost of a particular level of output; total input cost divided by units of output.

Question 24

Core Inflation

Answer 24

The underlying increases in the consumer price index after volatile food and energy prices are removed

Question 25

Nominal income

Answer 25

The number of current dollars received as wages, rent, interest, or profits.

Question 26

Real income

Answer 26

The amount of goods and services nominal income can buy.

Question 27

Unanticipated inflation

Answer 27

Increases in the price level that occur at a greater rate than expected

Question 28

Anticipated inflation

Answer 28

Increases in the price level that occur at the expected rate.

Question 29

Purchasing power

Answer 29

The amount of goods and services that a monetary unit of income can buy.

Question 30

Cost-of-living adjustment or COLA

Answer 30

An automatic increase in the income workers when inflation occurs.

Question 31

Labor union

Answer 31

A group of workers organized to advance the interests of the group to increase wages, shorten the hours worked, improve working conditions and so on.

Question 32

Subsidy

Answer 32

A payment of funds by a government, firm, or household for which receives no good or service and return; when made by government, it is a government transfer payment.

Question 33

Inflation premium

Answer 33

The component of the nominal interest rate that reflects anticipated inflation

Question 34

Real interest-rate

Answer 34

The interest rate expressed in dollars a concert value or adjusted for inflation.

Question 35

Nominal interest rate

Answer 35

The interest rate expressed in terms of annual amount currently charge for interest and not adjusted for inflation.

Question 36

Deflation

Answer 36

A decline in the economy’s price level.

Question 37

Nominal wage

Answer 37

The amount of money received by a worker per unit of time; money wage.

Question 38

Hyperinflation

Answer 38

A very rapid rise in the general price level.