Economic Concpets: Changes in Economic & Business Cycles Flashcards Preview

BEC > Economic Concpets: Changes in Economic & Business Cycles > Flashcards

Flashcards in Economic Concpets: Changes in Economic & Business Cycles Deck (32):
1

Business Cycles

Rise and fall of economic activity relative to its long-term growth trend

2

Macroeconomics

The study of economy as a whole. It examine the determinants of national income, unemployment, inflation, and how monetary fiscal policies affect economic activity

3

Gross Domestic Product GDP

Total market value of all final goods and services produced within the borders of a nation in a particular period

4

Nominal

Not Adjusted for inflation. This effects current prices of goods and services

5

Real GDP

Inflation

6

Price Index

Real GDP= (Nominal GDP/ GDP deflator) X 100

7

Real GDP per capita is real GDP divided by population

Economic growth is the increase in real GDP per capita over time

8

Expansionary Phase

GDP rises, profits rises
Unemployment decreases prices increases

9

Peak

high point of economic activity. It means the end of the expansionary phase. Firms likely to face capacity constraints

10

Contractionary Phase

GDP decreases Profits Decreases Unemployment increases

11

Trough

low point of economic activity

12

Recovery Phase

recovery phase follows a trough. Economy starts to return to its long-term trend

13

Recession

Contractionary Phase GDP decreases Profits decreases unemployment increases
2 consecutive quarters of falling national output

14

Depression

very severe recession. Large drops of GDP, high unemployment

15

Lagging Indicators

tend to follow economic activity, they change after a given economic trend has already started.

16

Coincident Indicators

Provides info about the current state of the economy,

17

Reasons for fluctuation

business cycles result from shifts in aggregate demand and/or aggregate supply

18

Changes in Wealth: Increase

Causes the aggregate demand curve to shift to right. Causes the economy to expand and leads to an increase in national output

19

Decreases in Wealth

Overall negative in the economy. causes the curve to shift to the left

20

Changes in Real Interest Rates : Increase in real interest rates

More saving and less borrowing . AD decreases GDP decreases Unemployment increases

21

Decrease in Real Interest Rates

AD increases, GDP increases Unemployment decreases and prices increases.

22

Increase in Government Spending

AD increases GDP increases Unemployment decreases prices increase

23

Decrease in Government Spending

AD decreases, GDP decreases, Unemployment increases Prices decrease

24

Increase in Consumer Taxes

AD decreases GDP decreases Unemployment increases Prices decreases

25

Decrease in Consumer Taxes

AD increases GDP increases unemployment decreases price increases

26

Multiplier Effect

1/ (1-MPC)

27

Factors that shift aggregate demand

-Taxes
-Wealth
-Interest Rates
-Consumer Spending
-Exchange Rates
-Government Spending

28

In a recession

Actual output will exceed potential output.

29

A recession can be caused by

- A decrease in aggregate supply and demand

30

Real GDP per capita

The measure most often used to compare standards of living across countries or across time

31

Gross domestic product includes which of the following measures



The total monetary value of all final goods and services produced within a nation in one year

32

The trough of a business cycle is generally characterized by

Unused productive capacity and an unwillingness to risk investments