Chapter 5 - Macroeconomics: The Big Picture Flashcards
The behavior of real GDP in the United States is characterized by a long-term upward trend known as ____________ and more transient increases and decreases around that trend known as ______________.
economic growth ; economic fluctuations
Recession
A decline in economic growth that lasts at least 6 months.
Depression
A recession that is very severe.
Peak
The highest point in economic activity before a recession.
Trough
The lowest point of economic activity at the end of a recession.
Expansion
The period between the trough of a recession and the next peak, consisting of a general rise in output and employment.
Recovery
The early part of an economic expansion, immediately after the trough of a recession.
Real GDP
the adjusted measure of production to account for changes in price. Its the most comprehensive metric for determining the state of the economy
To get a better measure of how individuals benefit from increases in GDP, we consider average production per person or ___________
real GDP per capita
Real GDP formula
Real GDP / # of people in economy
The unemployment rate _______ during recessions and ____________ during recoveries.
rises ; falls
Inflation and interest rates ___________ before recessions and then _____________ during and just after a recovery
rises ; falls
(2) key goals of economic growth
1- raise long-term growth
2- reduce the size of short-term economic fluctuations
(2) branches of Macroeconomics theory
1- Economic growth theory: aims to explain the long-term growth trajectory of real GDP over time
2- Economic fluctuations theory: tries to explain the short-term fluctuations in real GDP
Macroeconomic Theory
the combination of economic growth theory and economic fluctuations theory
