Chapter 8 Flashcards
What is the product market?
This is a market in which goods and services are supplied by firms to the households which pay for the goods and services.
What is a circular flow model?
It is a model that provides a look at how markets work and how different components interact with each other. It involves things such as the factor market, firms, the product market, and households.
What is the factor market?
This is the market in which households supply factors of production which are paid for by firms.
What is the business cycle?
This refers to the alternating periods of expansion and recession. That is, the economy’s pattern of increase and decrease in growth.
What is expansion?
This is a period of sustained increase in real GDP. It is characterized by an increase in total production and an increase in employment.
What is recession?
This is a period of sustained decrease in real GDP. It is characterized by a decrease in total production and a decrease in employment.
What is Gross Domestic Product?
This refers to the market value of all final goods and services produced in an economy during a period of time.
What is REAL Gross Domestic Product?
This refers to the GDP adjusted for changes in the price level.
What are the phases of the business cycle?
- Peak (point where an expansion ends and a recession begins) 2. Trough (point where a recession ends and an expansion begins)
What is inflation?
This refers to an increase in the average prices of goods and services measured over a period of time.
What is deflation?
This refers to an decrease in the average prices of goods and services measured over a period of time.
How do you calculate the inflation or deflation rate?
(Is - was)/was x 100
Draw a circular flow diagram
Draw a graph of what the GDP can look like including the following labels:
- Expansion
- Recession
- Peak
- Trough
