Economics: Business Cycles Flashcards
Activity Ratios
Ratios that measure how efficiently a company performs day-to-day take, such as the collection of receivables and management of inventory
Boom
An expansionary phase characterized by economic growth “testing the limits” of the economy.
Coincident economic indicators
Turning points are usually close to those of the overall economy; they are believed to have value for identifying the economy’s present state
Contraction
The period of a business cycle after the peak and before the trough; often called a recession or, if exceptionally severe, called a depression
Core inflation
The inflation rate calculated based on a price index of goods and services except food and energy.
Cost-Push
Type of inflation in which rising costs, usually wages, compel businesses to raise prices generally.
Deflation
Negative Inflation
Demand-Pull
Type of inflation in which increasing demand raises prices generally, which then are reflected in a business’s cost as workers demand wage hikes to catch up with the rising cost of living.
Depression
The period of a business cycle after the peak and before the trough; often called a recession or, if exceptionally severe, called a depression
Diffusion Index
Reflects the of the index’s components that are moving in a pattern consistent with the overall index
Discouraged Worker
A person who has stopped looking for a job or has given up seeking employment.
Economic Indicator
A variable that provides information on the state of the overall economy.
Employed
The number of people with a job.
Expansion
The period of a business cycle after its lowest point and before its highest point.
Fisher Index
The geometric mean of the laspeyres index
Headline Inflation
The inflation rate calculated based on the price index that includes all goods and services in an economy
Index of Leading Economic Indicators
A composite of economic variables used by analysts to predict future economic conditions.
Inflation
The percentage increase in the general price level from one period to the next; a sustained rise in the overall level of prices in an economy.
Inflation Rate
The percentage change in a price index, that is, the speed of overall price level movements.
Labor Force
The portion of the working age population (over the age of 16) that is employed or is available for work but not working (unemployed)
Lagging economic indicators
Turning points that take place later than those of the overall economy; they are believed to have value in identifying the economies past condition.
Laspeyres index
A price index created by holding the composition of the consumption basket constant
Leading Economic Indicators
Turning points that usually precede those of the overall economy; they are believed to have value for predicting the economies future state, usually near term.
Minsky Moment
Named for Hyman Minsky: A point in a business cycle when, after individuals become overextended in borrowing to finance speculative investments, people start realizing that something is likely to go wrong and a panic ensues leading to asset sell-offs
Natural Rate of Unemployment
Effective unemployment rate, below which pressures emerges in labor markets.
Neo-Keynesian
A group of dynamic general equilibrium models that assume slow-to-adjust prices and wages
New classical macroeconomics
An approach to macroeconomics that seeks the macroeconomic conclusions of individuals maximizing utility on the basis of rational expectations and companies maximizing profits
New Keynesians
A group of dynamic general equilibrium models that assume slow-to-adjust prices and wages
Non accelerating inflation rate of unemployment
Effective unemployment rate, below which pressures emerged in labor markets
Passche Index
An index formula using the current composition of a basket of products
Peak
The highest point of a business cycle.
Personal Consumption Expenditures
All domestic personal consumption; the basis for a price index for such called the PCE price index
Price Index
Represents the average prices of a basket of goods and services
Producer price index
Reflects the price changes experienced by domestic producers in a country.
Recession
A period which real GDP decreases (ie negative growth) for at least two successive quarters, or a period of significant decline in total output, income, employment and sales usually lasting from six months to a year.
Relative price
The price of a specific good or service in comparison with this of other goods and services
Say’s Lawm
Named for French economist JB Say: all that is produced will be sold because supply creates its own demand.
Stagflation
When a high inflation rate is combined with a high level of unemployment and a slowdown of the economy.
Treasury Inflation- Protected Securities
A bond issued by the United States Treasury Department that is designed to protect the investor from inflation by adjusting the principal of the bond for changes in inflation
Trough
The lowest point of a business cycle.
Underemployed
A person who has a job but has the qualifications to work a significantly higher-paying job.
Unemployed
People who are actively seeking employment but are currently without a job.
Unemployment Rate
The ratio of unemployed to the labor force
Unit Labor Cost
The average labor cost to produce one unit of output
Voluntarily unemployed
A person voluntarily outside the labor force, such as a jobless worker refusing an available vacancy
Wholesale Price Index
Reflects the price changes experienced by domestic producers in a country
Household
A person or group of people living in the same residence, taken as a basic unit in economic ananlysis
Impact Lag
The lag associated with the results of action affecting the company with a delay
Indirect Taxes
Taxes such as those on spending, in comparison to direct taxes.
Inflation Reports
A type of economic publication put out by many central banks
Inflation Uncertainty
The degree to which economic agents view future rates of inflation as difficult to forecast.
Keynesians
Economists who believe that fiscal policy can have powerful impacts on aggregate demand, output and employment when there is substantial spare capacity in an economy.
Legal Tender
Something that must be accepted when offered in exchange for goods and services
Lender of Last Resort
An entity willing to lend money when no other entity is ready to do so.
Liquidity Trap
A condition in which the demand for money becomes infinitely inelastic (horizontal demand curve) so that injections of money into the economy will not lower interest rates or affect real activity
Marginal propensity to consume
The proportion of an additional unit of disposable income that is consumed or spent; the change in consumption for a small change in income.
Marginal Propensity to Save
The proportion of an additional unit of disposable income that is saved (not spent)
Measure of Value
A standard for measuring value; a function of money
Medium of Exchange
Function of Money,
Asset that can be used to pay for debts, goods and services
Menu Costs
A cost of inflation in which business have to incur cost to change advertising material
Monetarist
Economists who believe that the rate of growth of the money supply is the primary determinant of the rate of inflation.
Monetary Policy
Actions taken by a nations central bank to affect aggregate output and prices through changes in bank reserves, reserve requirements, or its target interest rate
Monetary Transmission Mechanism
The process whereby a central banks interest gets transmitted through the economy and ultimately affects the rate of increases of prices.
Money
A generally accepted medium of exchange and unit of account
Money Creation
The process by which changes in bank reserves translate into changes in the money supply.
Money Multiplier
Describes how a change in reserves is expected to affect the money supply: 1/rr
Money Neutrality
Money only increases price level, not real values like output and unemployment
Narrow Money
Notes/Coins and other very liquid deposits
Net tax rate
The tax rate net of transfer payments
Neutral rate of interest
Interest rate that has no effect on economic growth
Official Interest Rate
An interest rate that a central bank sets and announces publicly; normally the rate at which it is willing to lend money to the commercial banks.
Official Policy Rate
An interest rate that the central bank sets and announces public ally; Normally the rate at which it is willing to lend money to the commercial banks.
