Oct.13 test Flashcards
Business Cycle
Series of growing and shrinking periods of economic activity
Consumer Price Index (CPI)
Measure of changes in the prices of goods an services commonly purchased by consumers
(market based)
Gross Domestic Product (GDP)
The market value of all final goods and services produced in a nation in a given time period
Inflation
- A sustained rise in the level of prices
- A sustained fall in the purchasing power of money
Net Exports
Goods/Services produced in the nation but sold in foreign nation, minus value of imports
Productivity
The amount of output produced from a set amount of inputs
Real GDP
GDP corrected for changes in prices from year to year
Real GDP Per Capita
Real GDP divided by total population
Underemployment
- Part time workers who want full time jobs
- They work below their employment level
- Laid off workers who are temporarily on underpaying jobs
Unemployment Rate
Percentage of the labor force that is jobless and looking for work
What are the four components of GDP? How do you calculate GDP?
Consumption
Investments
Government Spending
Net Exports
GDP is calculated by adding C+I+G+X
(X=net exports)
What are the requirements of GDP?
Has to be a 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
How does productivity increase?
Increase when the inputs produce more output
What are the effects of inflation?
Decreases the value of the dollar
Increases interest rates
Decreases real return on savings
What are the four types of unemployment ? Explain each type.
Frictional unemployment
Temporary unemployment because people are changing jobs
Seasonal Unemployment:
Unemployment linked to the changing of seasons
Structural Unemployment:
Situation in which the job exists, but workers do not have the necessary skills for the job
Possible Causes:
New technology replaces workers
New industries require specialized education
Cyclical Unemployment:
Unemployment caused by part of the business cycle with decreased economic activity
What is the difference between a depression and a recession?
Depression:
extended period of high unemployment and reduced business activity
Recession:
a contraction lasting 2 or more quarters
What is the lowest point of the business cycle? What is the highest point?
Lowest point:
Trough
Highest point:
Peak
Durable goods
Something that lasts a long time
Non-durable goods
Goods for immediate consumption
How is economic growth measured?
Percentage changes in real GDP
What does GDP measure?
The market value of all final goods and services, produces within a nations borders
How is the labor force for each nation calculated?
Labor force is made up of people of 16 who are employed of activity looking and available for work
How is the unemployment rate calculated?
Percentage of the labor force that is jobless and looking for work
What items are not included in GDP?
Stuff that is not a final product
Not produced in nation’s border
What are the our stages of the business cycle?Explain each.
Expansion
A period of economic growth or increase in a nation’s real GDP over a period of time
Peak
The point at which the GDP is the highest
Contraction
Time period of economic slowdown or decline
Trough
The point at which GDP and unemployment stop declining
