Chapter 26 Flashcards

(28 cards)

1
Q

BUSINESS CYCLE

A

Recurring increases and decreases in the level of economic activity over periods of years; consists of peak, recession, trough, and expansion phases

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2
Q

PEAK

A

activity has reach temporary maximum in the business cycle

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3
Q

RECESSION

A

period of declining real GDP, accompanied by lower real income and higher unemployment

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4
Q

TROUGH

A

activity has reached a temporary minimum in the business cycle

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5
Q

EXPANSION

A

a phase of the business cycle in which real GDP, income, and employment rise

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6
Q

UNEMPLOYMENT RATE

A

the percentage of the labor force unemployed at any time

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7
Q

Types of unemployment

A
  1. Frictional unemployment
  2. Structural Unemployment
  3. cyclical unemployment
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8
Q

FRICTIONAL UNEMPLOYMENT

A

type of unemployment caused by workers voluntarily changing jobs and by temporary layoffs; unemployed workers between jobs

inevitable and in part desirable

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9
Q

STRUCTURAL UNEMPLOYMENT

A

unemployment of workers whose skills are not demanded by employers, who lack sufficient skill to obtain employment, or who cannot easily move to locations where jobs are available

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10
Q

CYCLICAL UNEMPLOYMENT

A

a type of unemployment caused by insufficient total spending

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11
Q

Full employment

A

situation in which the unemployment rate is equal to the full employment rate of unemployment and where frictional and structural unemployment occur but not cyclical unemployment

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12
Q

FULL-EMPLOYMENT RATE OF UNEMPLOYMENT

A

unemployment rate at which there is no cyclical unemployment of the labor force

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13
Q

NATURAL RATE OF UNEMPLOYMENT

A

occurs when there is no cyclical unemployment and the economy is achieving its potential output

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14
Q

DISCOURAGED WORKERS

A

employees who have left the labor force because they have not been able to find employment

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15
Q

GDP GAP

A

actual gross domestic product minus potential output

Actual GDP – potential output

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16
Q

OKUN’S LAW

A

generalization that any 1-percentage-point rise in the unemployment rate above the full employment rate of unemployment is associated with a rise in the negative GDP gap by 2 percent of potential output

17
Q

INFLATION

A

rise in general level of prices in an economy

18
Q

DEFLATION

A

decline in the economy’s price level

19
Q

Types of Inflation

A
  1. Demand-pull inflation

2. Cost-push inflation

20
Q

DEMAND-PULL INFLATION

A

increases in the price level resulting from an excess of demand over output at the existing price level, caused by an increase in aggregate demand

21
Q

COST-PUSH INFLATION

A

increases in the price level resulting from an increase in resource cost and hence in per unit production costs

22
Q

CORE INFLATION

A

underlying increases in the price level after volatile food and energy prices and removed

23
Q

Who is hurt by inflation?

A
  1. fixed income
  2. savers
  3. creditors
24
Q

Who is helped or unaffected by inflation?

A
  1. flexible income receivers

2. debtors

25
HYPERINFLATION
a very rapid rise in the price level; an extremely high rate of inflation
26
UNANTICIPATED vs. ANTICIPATED INFLATION
UI- increases in the price level at a rate greater than expected AI- increases in the price level that occur at the expected rate
27
Nominal Income
number of dollars received by an individual or group for its resources during some period of time
28
Real Income
amount of goods and services that can be purchased with nominal income during some period of time; nominal income adjusted for inflation