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Economics > The Buisness Cycle > Flashcards

The Buisness Cycle Flashcards

1
Q

Three basic measures of macro performance

A

Output GDP growth

Unemployment

Inflation

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2
Q

GDP

A

The total value of output (goods and services) produced in an economy during a given period of time

Measured by the Bureau of Economic Analysis, an agency within the Department of Commerce.

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3
Q

An economy’s potential output is reflected in its

A

Production Possibilities Curve

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4
Q

Production Possibilities

A

The alternative combination of goods and services that could be produced in a given time period with all available resources and technology

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5
Q

When there is GDP growth, the production possibilities curve shifts _______

A

Outwards

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6
Q

The Business Cycle

A

The altering periods of economic growth and contraction experienced by the economy

It shows the rise and fall of the economy over time

On a graph it is a straight line of economic growth with a squiggle going through it.

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7
Q

Business cycles are measured by?

A

Changes in REAL GDP

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8
Q

Real GDP

A

The inflation- adjusted value of GDP or the value of output measure in constrained prices

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9
Q

Nominal GDP

A

Measured in current prices

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10
Q

Recession

A

A decline in total output (real GDP) for two or more consecutive quarters

It is a slump or downturn in the economy

We rely on the National Bureau of Economic Research as our official designator of a recession

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11
Q

Who designates a recession?

A

The National Bureau of Economic Research

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12
Q

When output _______, jobs are eliminated.

A

Jobs

Unemployment is measured by the Bureau of Labor Statistics, agency of the department of labor

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13
Q

The labor force consists of

A

Everyone over 16 who is actually working

All those who are not working but actively seeking employment

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14
Q

The unemployment rate is the proportion of the labor force that is unemployed

What is the unemployment rate equation?

A

Unemployment rate = # of the unemployed
————————-
# in labor force

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15
Q

Seasonal unemployment

A

Caused by seasonal changes

Ex
Teens with summer jobs

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16
Q

Frictional unemployment

A

This is a brief period of unemployment associated with a job search

Examples
Recent graduates
Workers in between jobs

17
Q

Structural Unemployment

A

Results from a mismatch between the skills of labor force and the skills needed by employers

18
Q

Cyclical Unemployment

A

When there are not enough jobs to go around due to the downturns in the business cycle

This unemployment is DUE TO RECESSION

Example
The Great Depression

19
Q

Macroeconomics

A

The study of aggregate economic behavior, of the economy as a whole

Explains the business cycle

20
Q

Full employment

A

The lowest rate of unemployment compatible with price stability

Estimated to be between 4 and 6

21
Q

Inflation

A

An increase in the average level of prices, not a change in any specific price

22
Q

Deflation

A

A decrease in the average level of prices of goods and services

23
Q

Relative price

A

Price of one good in comparison with the price of other goods

24
Q

Problems with inflation

A

Uncertainty may cause people to change their consumption, savings or investment behavior

Fear of rapidly increasing prices may deter consumers from making long-term purchasing decisions

Firms may postpone construction or not finish a new construction.

25
Q

MEASURING INFLATION

Consumer Price Index (CPI)

A

A measure of changes in the average price of consumer goods and services

Because of quality improvements and new products the CPI is not perfect measure of inflation

26
Q

MEASURING INFLATION

Inflation Rate

A

The annual rate of increase in the average price levels

27
Q

Full employment and balanced growth act of 1978

A

Establish goal to hold the inflation rate at under %3

28
Q

Old products become better as a result of

A

Quality improvements

29
Q

The ______ _________ is used to measure the CPI CHANGES

A

Market basket

Economics (6 decks)

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