Chapter 11- Successes and Difficulties in the Market Economy Flashcards
the three grounds in which market economies are criticized severely in today’s world
- business fluctuations (prosperity, high employment rates followed by decreased economic activity and unemployment)
- inflation of money and prices
- it is a competitive economic system that is hard, greedy, selfish, and unjust
the recurrent fluctuation in the level of economic activity
business cycle
the four main components of a cycle
expansion, peak, recession, trough
part of a cycle in an industry that increases the amount of goods they produce
expansion
cause the nation’s gross domestic product (GDP) to rise noticeably
expansion
the value of all finished goods and services produced within a country during a year’s time
gross domestic product (GDP)
used before the early 1990s
refers to the value of all finished goods and services produced by a nation’s citizens during a year’s time
gross national product
the high point of a business cycle where activity is at its highest
the peak
the phase which comes after a short or prolonged business boom has peaked out
a period of economic decline
recession
although there is no clear distinction, the term _______________ is normally reserved for a recession that is unusually severe and long-lasting
depression
the lowest point in a business cycle is called the
trough
components of the economy that normally change before the rest of the economy
leading indicators
two types of inflation
demand-pull inflation
cost-push inflation
caused when the demand becomes greater than the supply, resulting in shortages
demand-pull inflation
triggered when businesses face rising production costs, forcing them to increase the prices they charge for their goods
cost-push inflation
the same outcome of both types of inflation
rising costs cause workers to demand more pay so that they can afford goods, while businesses pay for these wage-hikes by further increasing the prices of goods
one of the most common tools for measuring the growth of inflations in the US is the
Consumer Price Index (CPI)
prices are compared to the
base period
the economic condition in which high inflation is combined with high unemployment, resulting in stagnation of productivity
stagflation
the theory that reduction of taxes makes more money available for private investment in capital and research, thereby increasing productivity
supply-side economics
