chapter 6.3 part 1 Flashcards
(13 cards)
When news reports refer to how much the economy has grown, what is it referring to?
Real GDP
By convention, how does the government report GDP growth?
At an annualized rate: whatever is the calculated growth in real GDP for the quarter is multiplied by four.
What does figure 6.10 show in terms of declines?
Short term declines have regularly interrupted the generally upward long-term path of GDP.
What is a recession?
A significant decline in real GDP.
What is a depression?
An especially lengthy and deep recession.
Why is real GDP important?
It is highly correlated with other measures of economic activity, like employment and unemployment.
For example, when real GDP rises, so does employment.
What is the most significant human problem associated with recessions and depressions?
A slowdown in production means that firms need to lay off or fire their workers.
What is the highest point in an economy before a recession begins?
The peak.
What is the lowest point of a recession before a recovery begins?
Trough.
Where does a recession last?
From peak to trough.
Where does an expansion last?
From trough to peak.
What is the business cycle?
The economy’s movement from peak to trough and trough to peak.
When did the 3 longest troughs to peaks expansions happen in the twentieth century?
Since 1960.
