Module 2

Question 1

depression

Answer 1

deep and prolonged economic downturn

when the real GDP falls more than 10%

Question 2

unemployment rate

Answer 2

% unemployed labor force

indicates job market conditions

Question 3

aggregate output

Answer 3

the economy’s total production of goods and services for a time period
falls during recessions and rises during expansions

Question 4

Inflation

Answer 4

rise in overall price level causes cash to loose value

discourages people from keeping cash

Question 5

expansion

Answer 5

period of rising output and employment and real GDP following a recession
goes above previous peak

Question 6

economic growth

Answer 6

sustained increase in maximum possible output of an economy

Question 7

recession

Answer 7

less prolonged period of falling output and employment

falling real GDP for 2 consecutive quarters

Question 8

price stability

Answer 8

ideal state of overall steady or very slowly changing price

Question 9

business cycle

Answer 9

alternation between macroeconomic downturns and upturns

typically 5-6 years

Question 10

deflation

Answer 10

fall in overall price level causes people to not spend their money

Question 11

ceteris paribus

Answer 11

“all other things equal” assumption

in a model, you must assume all relevant factors stay the same so that you can study the effects of one change at a time

Question 12

output

Answer 12

quantity of goods and services produced

Question 13

labor force

Answer 13

employment + unemployment

Question 14

unemployment

Answer 14

total number of people looking for and capable of work but not actually employed

Question 15

employment

Answer 15

total number of people currently working for pay

Question 16

Model

Answer 16

simplified version of reality, allows study of the effects of one change at a time

Question 17

Recovery

Answer 17

rising real GDP up to the previous peak