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45 Cards in this Set
- Front
- Back
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Expansion: 1998-2000
Peak: 2000 Contraction: 2001-2002 Trough: 2002 |
Identify the business cycles between 1998 to 2006.
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What is a business cycle?
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Alternating periods of economic growth and contraction, which can be measured by changes in real GDP
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What are the four phases of a business cycle?
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Peak
Recession (Contractionary) Trough Recovery |
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What is the "old school" definition of a recession?
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A downturn in the business cycle during which real GDP declines
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How does the NEBR (National Economic Bureau of Research) define a recession?
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"A recession is a significant decline in activity spread across the economy, lasting more than a few months, visible in industrial production, employment, real income and trade."
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What is economic growth?
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An expansion in national output measured by the annual percentage increase in a nation’s real GDP
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What are the three types of economic indicators?
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Leading
Coincident Lagging |
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What is a leading indicator?
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Variables that change before real GDP changes
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What is a coincident indicator?
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Variables that change at the same time that real GDP changes
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What is alagging indicator?
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Variables that change after real GDP changes
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Who is considered unemployed?
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Anyone who is 16 years of age and above who is actively seeking employment
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Who is considered employed?
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Anyone who works at least one hour a week for pay or at least 15 hours per week as an unpaid worker in a family business
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What is the unemployment rate?
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The percentage of people in the labor force who are without jobs and are actively seeking jobs.
# of person unemployed divided by the total labor market. |
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Who is a discouraged worker?
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A person who wants to work, but who has given up searching for work. He or she believes there will be no job offers
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What are the 3 criticisms of the unemployment rate calcualtion?
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Does not include discouraged workers
Includes part-time workers Does not measure underemployment |
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What are the types of unemployment?
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Seasonal
Frictional Structural Cyclical |
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What is seasonal unemployment?
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Unemployment caused by recurring changes in hiring due to changes in weather conditions
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What is frictional unemployment?
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Unemployment caused by the normal search time required by workers with marketable skills who are changing jobs, entering, or re-entering the labor force
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What is structural unemployment?
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Unemployment caused by a mismatch of the skills of workers out of work and the skills required for existing job opportunities
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What is cyclical unemployment?
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Unemployment caused by the lack of jobs during a recession
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What is full employment?
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The situation in which an economy operates at an unemployment rate equal to the sum of the seasonal, frictional, and structural unemployment rates
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What is considered full employment?
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The natural rate of unemployment changes over time, but today it is considered to be about 5%
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What is the GDP gap?
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The GDP gap is the difference between full-employment real GDP and actual real GDP
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What is deflation?
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A decrease in the general (average) price level of goods and services in the economy
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What is inflation?
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An increase in the general (average) price level of goods and services in the economy
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What is the Consumer Price Index?
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The CPI is an index that measures changes in the average prices of consumer goods and services
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Who reports the CPI?
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The Bureau of Labor Statistics (BLS) of the Department of Labor
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Which goods and services are included in the CPI?
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The BLS records average prices for a “market basket” of different items purchased by the typical urban family
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What is disinflation?
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A reduction in the rate of inflation
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What are some criticisms of the CPI?
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It can overstate or understate the impact of inflation for certain groups
Does not measure quality Substitutes are ignored |
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What is real income?
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The actual number of dollars received (nominal income) adjusted for changes in the CPI
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What is wealth?
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The value of the stock of assets owned at some point in time
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How is wealth affected by inflation?
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Inflation can benefit holders of wealth because the value of their assets tends to increase as prices rise
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What will cause your real income to decline?
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The rate of inflation is greater than your rate of income
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How does unanticipated inflation affect borrowers?
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They beneifit positively because they are paying back their loans in "cheaper" dollars.
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How does unanticipated inflation affect lenders?
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They negatively affected because they are being paid back in "cheaper" dollars.
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How does unanticipated inflation affect persons on a fixed income?
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Their "real" income diminishes and thus their purchasing power.
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What is the real interest rate?
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The nominal rate of interest minus the inflation rate
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What is hyperinflation?
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An extremely rapid rise in the general price level
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What are the two basic types of inflation?
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Demand-pull
Cost-push |
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What is demand-pull inflation?
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A rise in the general price level resulting from an excess of total spending (demand)
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When does demand-pull inflation occur?
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When the economy is operating at or near full employment
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What is cost-push inflation?
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A rise in the general price level resulting from an increase in the cost of production
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What can cause cost-push inflation?
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Cost increases for labor, raw materials, construction, equipment, borrowing etc.
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What is a wage-price spiral?
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A situation that occurs when increases in nominal wage rates are passed on in higher prices, which, in turn, result in even higher nominal wages and prices
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