CH 6 Economic Growth, Business Cycles, and Unemployment

Question 1

-The study of problems that affect the economy as a whole

Answer 1

Macroeconomics

Question 2

-Lack of economic growth
-Recessions
-Unemployment
-Inflation

Answer 2

What to do or not to do about them

Question 3

-GDP
-Inflation
-Economic Growth
-Business Cycles

Answer 3

-Key Macroeconomic

Question 4

(Free Exercise) Look up Production Possibility Frontier (PPF)

Answer 4

Production Possibility Frontier moment

Question 5

-How do we measure growth?

Changes in total or potential output or GDP over time
___ ______ ____

Answer 5

GDP Growth rate

Question 6

__________ ______ - The highest amount of output an economy can sustainably produce using existing production processes and resources.
-U.S. economic output has grown at an annual 2.5 to 3.5 percent since World War 1

Answer 6

Potential output

Question 7

_________ _____
-Upward or downward movement of economic activity that occurs around the long-term growth trend or long-term growth in potential output

Answer 7

Business Cycle

Question 8

(Free Exercise) Look at Business Cycle Phases

Answer 8

Business Cycle Phases Moment

Question 9

Four Phases of the business cycle

Answer 9

Peak, downturn, trough, and upturn

Question 10

The top of a business cycle

Answer 10

Peak

Question 11

-Eventually the economy enters a _______ or ___________ and may enter a recession

Answer 11

Downturn, Contraction

Question 12

A _________ is a decline in real output that persists for more than ___ consecutive quarters of a year.
-_________ - negative GDP Growth

Answer 12

Recession

Question 13

The bottom of a recession or depression is called the ______.

Answer 13

Trough

Question 14

As output begins to expand, the economy comes out of the trough; called an ______ or _________.

Answer 14

upturn, expansion.

Question 15

A __________ is a deep and prolonged recession

Answer 15

depression

Question 16

How to determine where we are in the cycle

Look at the economic indicators

Answer 16

*GDP Growth Rate
*Unemployment Rate
*Inflation Rate
*Housing starts - new construction
*Consumer Confidence

Question 17

Following the crash of 2008 - the U.S. economy experienced __________ _________ - a period of protracted slow growth with not enough job creation.

Answer 17

Structural stagnation.

Question 18

“Jobless recovery”
-Based on changes in the economy & changes in production.

Answer 18

Structural Stagnation

Question 19

_________ _________ starts as cyclical downturn - when economy doesn’t return to long-term growth rate
-Starts as short term but becomes long term
-Unemployment is not due to temporary layoffs, as in a business cycle; but to longer-term changes in the structure of economy and labor market

Answer 19

Structural Stagnation

Question 20

________ population
-16 years of age and older

Answer 20

civilian

Question 21

______ force
-Employed & Unemployed

Answer 21

Labor

Question 22

Not in _____ Force
-Neither Employed nor Unemployed

Answer 22

Labor

Question 23

Unemployment Rate

Answer 23

Ratio of Unemployed to Labor Force

Question 24

__________ -divided into labor force & not in the labor force

Answer 24

Population

Question 25

Who's not in the labor force?

Answer 25

Full-time students, military, retirees, under 16, stay at home parents, incarcerated, institutionalized

Question 26

- those people in an economy who are willing and able to work. -divided into employed & unemployed

Answer 26

labor force

Question 27

= tells us what percentage of the population is in the labor force = number in the labor force/population

Answer 27

Labor Force Participation Rate

Question 28

What major changes have affected the Labor Force Participation Rate?

Answer 28

-Changes in demographics -Labor laws - Family leave -Immigration -Pandemic

Question 29

- must be willing & able to work alongside actively looking for work

Answer 29

Unemployed

Question 30

The ___________ ____ is the percentage of people in the labor force who are willing & able to work but who cannot find jobs - must be actively looking for work

Answer 30

Unemployment Rate

Question 31

of unemployed person/Labor force (includes employed & unemployed)

Answer 31

Unemployment Rate

Question 32

If the total unemployed stands at 12 million and the labor force stands at 150 million, the unemployment rate is...

Answer 32

12 million/150 million = 0.08 x 100 = 8%

Question 33

______ ____ of employment - the lowest sustainable rate of unemployment that policy makers believe is achievable given existing conditions -Used to be around 5-6%

Answer 33

Target rate

Question 34

- Unemployed worker who is no longer looking for work

Answer 34

Discouraged worker

Question 35

Why might a unemployed worker transition into a discouraged worker?

Answer 35

-Due to long deep recession -Due to outdated skills

Question 36

Are discouraged workers counted in the unemployed rate?

Answer 36

No, they are no longer actively looking for work and not counted as part of the labor force

Question 37

(Marginally Employed:) -Working part-time but seek full-time

Answer 37

involuntary part-timers

Question 38

(Marginally Employed:) -Working a job that doesn't utilize your skills

Answer 38

underemployed

Question 39

U_ - Official unemployed rate - Must be willing and able to work AND actively looking for work

Answer 39

U3

Question 40

U_ - U_ plus discouraged workers, part timers who want full-time work, and underemployed workers

Answer 40

U6, U3

Question 41

Issues with official rate - U_ -Doesn't count discouraged workers -Counts part-time as employed even if want full-time -Counts underemployed as employed even if not using skills

Answer 41

U3

Question 42

__________ unemployment is that caused by institutional structure of an economy or by economic restructuring making some skills obsolete

Answer 42

Structural unemployment

Question 43

___________ unemployment is unemployment caused by people entering the job market and people quitting a job just long enough to look for and find another job

Answer 43

Frictional unemployment

Question 44

________ unemployment - caused by change in season

Answer 44

Seasonal Unemployment

Question 45

________ Unemployment is that which results form fluctuations in economic activity

Answer 45

Cyclical unemployment

Question 46

4 types of Unemployment

Answer 46

Structural, Frictional, Seasonal, Cyclical

Question 47

_________ Economics: pre -- Great Depression

Answer 47

Classical

Question 48

_________ Economics: Great Depression -- 70's

Answer 48

Keynesian

Question 49

____________ Economics: 70s -- 2000s

Answer 49

Neoclassical

Question 50

_________ economists believe that business cycles are temporary glitches -Believe in laissez-faire or no government intervention -Focus on long run

Answer 50

Classical

Question 51

-Over time, economy grow -- their concern -Problem is too much government regulation -Laissez faire, invisible hand

Answer 51

Classical Economics

Question 52

-The economy wasn't working and correcting itself -John Maynard Keynes - British economist -"In the long run, we're all dead."

Answer 52

Keynesian economics

Question 53

-Solution is government policies to stimulate the economy -_________ economist believe that business cycles reflect underlying problems that can be addressed with government policies -Focus on short term situation

Answer 53

Keynesian

Question 54

-_________ - Focus on ____-run so only concerned if there's economic growth

Answer 54

Classical, long-run

Question 55

-Incentives for supply -How to increase supply or output -Supply-side economics -Compare to PPC out

Answer 55

Classical/Long-run

Question 56

_________ - focus on _____-run business cycle minimizing recessions and inflation

Answer 56

Keynesian, Short-run

Question 57

-Focus on demand -How do we ensure enough demand for our goods? -Demand-side economics -Concerned with business cycles and recessions

Answer 57

Keynesian/Short-run business cycle

Question 58

_________ economists argue that the government should just accept that business cycles occur and take a laissez-faire stance

Answer 58

Classical

Question 59

__________ economists argue that government can influence these fluctuations with policy actions

Answer 59

Keynesians