Economic Performance Test Flashcards
Define Business Cycle
Series of growing and shrinking periods of economic activity
-measured in increases or decreases in real GDP
Define Consumer Price Index
Measure of changes in the prices of goods and services commonly purchased by consumers
Define Durable Good
Good that does not wear out or go away quickly
Define GDP
The market value of all final goods and services produced in a nation in a given time period.
- Must be final
- Produced in given time period
- Produced within a nation’s borders
Define inflation
A sustained rise in the level of prices and a sustained fall in the purchasing power of money
Define net Exports
Goods and services produced in the nation but sold in foreign nations, minus value of imports.
Define Non-Durable goods
Goes away quickly; perishable
Define Productivity
Amount of output produced from a set amount of inputs
- Refers to the quantity of goods and services a worker can produce for each hour of work
- Increases when the same amount of inputs produce more output
Define Real GDP
GDP corrected for changes in prices from year to year
- Estimate of GDP if prices remained constant
- More accurate measure of economic performance
- Good indicator of how well a Country’s resources are being utilized
Define REal GDP Per Capita
Real GDP divided by population
-reflects each person’s share of real GDP
Define Underemployment
- Part time workers who want full time jobs
- people working below their skill levels
- laid off workers who are temporary, lower paying jobs
Define Unemployment Rate
Percentage of the labor force that is jobless and looking for work
How is economic growth measured?
percentage changes in GDP
-Dependent upon quality/quantity of resources
What does GDP measure?
The market value of all final goods and services produced in a nation in a given time
What are the four components of GDP?
- Consumption
- Investments
- Government Spending
- Net Exports
How do you calculate GDP?
Consumption+Investments+Government spending+Net Exports=GDP
What items are not included in GDP?
Personal Investments
What are the requirements of GDP?
- Has to be final product or service
- Must be produced in a given time period
- Must be produced within a nation’s borders
What is the usual measure of a nation’s standard of living?
Real GDP per capita, not quality of life
How does productivity increase?
When the same amount of inputs produce more output
What are the effects of inflation?
- Decreases value of dollar bill
- Increases interest rates
- Decreases real return on savings
How is the labor force for each nation calculated?
Adding the number of people over 16 who are employed or actively looking for work
How is the unemployment rate calculated?
The percentage of the labor force that is jobless and looking for work
What are the 4 types of unemployment?
- Frictional
- Seasonal
- Structural
- Cyclical
What are the four parts of the business cycle?
- Expansion
- Peak
- Contraction
- Trough
What is the difference between a depression and a recession?
A depression is an extended period of high unemployment and reduced business activity
A recession is a contraction lasting two or more quarters
What is the lowest point of the business cycle?
The trough
What is the highest point of the business cycle?
the peak
Describe Frictional unemployment
- Temporary unemployment because one is changing jobs
- Reflects worker’s freedom to find work that best suits them at the highest wage possible
Describe Seasonal unemployment
Linked to the changing of seasons
-Ex:
Construction, migrant and farm jobs, tourism
Describe Structural unemployment
Situation in which the job exists, but no one can fill it
Possible causes: New technology replaces workers, new industries require specialized education
Describe Cyclical unemployment
Caused by part of the business cycle with decreased economic activity
-follows business cycle, typically in contraction phase
Explain expansion of the business cycle
a period of economic growth or increase in a nation’s real GDP over time
- Low unemployment
- More resources and higher prices
Explain peak of the business cycle
GDP is at its highest
- Resources are tightened due to rising prices
- Businesses lose some profits and cut production
Explain contraction of the business cycle
Economic slowdown or decline
- Producers cut back
- Resources become scarce
- Prices stabilize
Explain trough of the business cycle
The point at which GDP and unemplyment stop declining
-Cycle complete
