Chapter 8: Business Cycles Flashcards

1
Q

the business cycle

A

the short-term fluctuations experienced in the economy due to changes in levels of economic activity

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2
Q

expansion

A

a phase of the business cycle characterized by increasing real GDP, income, and employment

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3
Q

peak

A

a point in the business cycle where real GDP reaches its max; marks the end of an expansion

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4
Q

recession

A

decline in real output for at least two consecutive quarters

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5
Q

depression

A

a long-lasting and severe recession

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6
Q

trough

A

lower point of economic activity in the business cycle, where real GDP reaches its minimum; end of a recession

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7
Q

labor force

A

individuals age 16+ who are are employed or actively seeking employment not institutionalized

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8
Q

employed

A

of people in the economy who hold an FT or PT position

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9
Q

unemployed

A

of people in the economy who have not had a job for at least a week but have actively been looking in the past 4 weeks

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10
Q

Labor force participation rate (LFPR)

A

labor force / # 16 years and older x 100

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11
Q

frictional unemployment

A

unemployment resulting from workers searching and waiting for jobs

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12
Q

structural unemployment

A

unemployment occurring when the skills that some workers have to offer don’t match the skills needed by firms in the economy

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13
Q

cyclical unemployment

A

unemployment resulting from fluctuations in the business cycle; when the natural rate of unemployment is lower than the actual rate of employment

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14
Q

seasonal unemployment

A

a type of frictional unemployment resulting from workers searching and waiting for jobs due to seasonal fluctuations in demand for certain types of workers

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15
Q

discouraged worker

A

someone who wants to work but is not actively searching for a job

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16
Q

unemployment rate

A

unemployed / labor force x 100; a good indicator of the overall health of the economy

17
Q

full employment

A

an economy experience when it is operating at the natural rate of unemployment

18
Q

natural rate of unemployment

A

natural rate of unemployment = frictionally unemployed + structurally unemployed / labor force x 100

19
Q

inflation

A

general increase in the price of goods and services; measures how prices change from one period to the next

20
Q

consumer price index (CPI)

A

economic indicator used to measure over time the average price of a market basket of goods and services purchased by the typical consumer

CPI = value of a market basket / value of same market basket in base year x 100

NOTE: CALCULATED MONTHLY; CPI IS 100 IN IT’S BASE YEAR

21
Q

8 CPI categories

A

1) food & beverages 2) housing 3) apparel 4) transportation 5) medical care 6) recreation 7) education and communication 8) other goods and services

22
Q

inflation rate

A

% change in overall price of goods and services in an economy

23
Q

hyperinflation

A

a situation in which the inflation rate is positive and greater than 50% per month

24
Q

disinflation

A

a situation in which the inflation rate is positive but declining over time

25
deflation
a situation in which the inflation rate is negative
26
Producer Price Index (PPI)
price index that measures the average change over time in the selling prices received by producers of goods and services
27
nominal income
of dollars received in exchange for the different resources available in the economy
28
real income
amount of goods and services that can be purchased with nominal income; the inflation-adjusted measure of income real income = nominal income / CPI x 100