Economic Concpets: Changes in Economic & Business Cycles Flashcards

1
Q

Business Cycles

A

Rise and fall of economic activity relative to its long-term growth trend

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2
Q

Macroeconomics

A

The study of economy as a whole. It examine the determinants of national income, unemployment, inflation, and how monetary fiscal policies affect economic activity

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3
Q

Gross Domestic Product GDP

A

Total market value of all final goods and services produced within the borders of a nation in a particular period

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4
Q

Nominal

A

Not Adjusted for inflation. This effects current prices of goods and services

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5
Q

Real GDP

A

Inflation

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6
Q

Price Index

A

Real GDP= (Nominal GDP/ GDP deflator) X 100

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7
Q

Real GDP per capita is real GDP divided by population

A

Economic growth is the increase in real GDP per capita over time

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8
Q

Expansionary Phase

A

GDP rises, profits rises

Unemployment decreases prices increases

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9
Q

Peak

A

high point of economic activity. It means the end of the expansionary phase. Firms likely to face capacity constraints

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10
Q

Contractionary Phase

A

GDP decreases Profits Decreases Unemployment increases

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11
Q

Trough

A

low point of economic activity

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12
Q

Recovery Phase

A

recovery phase follows a trough. Economy starts to return to its long-term trend

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13
Q

Recession

A

Contractionary Phase GDP decreases Profits decreases unemployment increases
2 consecutive quarters of falling national output

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14
Q

Depression

A

very severe recession. Large drops of GDP, high unemployment

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15
Q

Lagging Indicators

A

tend to follow economic activity, they change after a given economic trend has already started.

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16
Q

Coincident Indicators

A

Provides info about the current state of the economy,

17
Q

Reasons for fluctuation

A

business cycles result from shifts in aggregate demand and/or aggregate supply

18
Q

Changes in Wealth: Increase

A

Causes the aggregate demand curve to shift to right. Causes the economy to expand and leads to an increase in national output

19
Q

Decreases in Wealth

A

Overall negative in the economy. causes the curve to shift to the left

20
Q

Changes in Real Interest Rates : Increase in real interest rates

A

More saving and less borrowing . AD decreases GDP decreases Unemployment increases

21
Q

Decrease in Real Interest Rates

A

AD increases, GDP increases Unemployment decreases and prices increases.

22
Q

Increase in Government Spending

A

AD increases GDP increases Unemployment decreases prices increase

23
Q

Decrease in Government Spending

A

AD decreases, GDP decreases, Unemployment increases Prices decrease

24
Q

Increase in Consumer Taxes

A

AD decreases GDP decreases Unemployment increases Prices decreases

25
Decrease in Consumer Taxes
AD increases GDP increases unemployment decreases price increases
26
Multiplier Effect
1/ (1-MPC)
27
Factors that shift aggregate demand
- Taxes - Wealth - Interest Rates - Consumer Spending - Exchange Rates - Government Spending
28
In a recession
Actual output will exceed potential output.
29
A recession can be caused by
- A decrease in aggregate supply and demand
30
Real GDP per capita
The measure most often used to compare standards of living across countries or across time
31
Gross domestic product includes which of the following measures
The total monetary value of all final goods and services produced within a nation in one year
32
The trough of a business cycle is generally characterized by
Unused productive capacity and an unwillingness to risk investments