Chapter 10 Economic Fluctuations, Unemployment, and Inflation – Flashcards
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increases and decreases in the level of business activity that accur at regular intervals and last for varying lengths of time
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business cycles
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a decline in real gdp for two consecutives quarters
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recession
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the phase of the business cycle during which real gdp increases from trough level to level of previous peak
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recovery
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the total number of people over 16 who are willing and able to work who have been unsuccessfully seeking employment
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unemployment
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the number of unemployed divided by the labor force
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unemployment rate
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people without jobs who have given up looking for work
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discourage worker
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people who are between jobs or just entering or reentering the labor market
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frictional unemployment
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when people are out of work for a couple of years or longer which may be due to technological or economic displacement or lack of skills
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structural unemployment
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when people are out of work because the economy is operating below the full employment level. it rises sharply during recessions
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cyclical unemployment
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unemployment resulting from the seasonal pattern of work in certain industries.
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seasonal unemployment
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a general rise in the price level
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inflation
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the most important measure of inflation. tells us percentage rise in the price level since the base year, which is set at 100
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consumer price index
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a decline in general level of prices for a period of years
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deflation
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occurs when the rate of inflation declines
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disinflation
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caused primarily by an increase in aggregate demand to many dollars chasing to few goods
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demand pull inflation
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rising cost of doing business push up prices
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cost push inflation
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runaway inflation, in the U.S. double digit inflation.
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hyper inflation
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a period of either recession on stagnation accompanied by inflation
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stagflation
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measurement of stagflation and is calculated by adding the unemployment rate and the inflation rate
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misery index
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the expansion of the business cycle beyond the previous peak
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prosperity
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the top of the business cycle
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peak
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bottom of the business cycle
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trough
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the three worst recessions since WWII began
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1973, 1981, 2007
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stagflation is a contraction of the words___and___
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stagnation, inflation
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to find the number of people in the labor force we need to add
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employed, unemployed
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a person who is functionally illiterate faces long periods of____unemployment
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structural
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when the overall unemployment rate is 6.5%, the cyclical unemployment rate is
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1.5%
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the upper turning point of a business cycle just before the onset of a recession is called
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peak
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OPEC nations quadrupled the price of oil
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1973
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the low point of the business cycle__and the high point is
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trough, peak
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theories that place the cause of business cycles within the economy rather than outside are known as____theories
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endogeneous
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a recession is set off when retailers___
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cut back on orders of inventory
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the monetary theory of the business cycle hypothesizes that recessions are set off when___ and recoveries begin when the monetary authorities____
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the monetary authorities slow down, the rate of increase in the money supply allow the money supply to increase more quickly
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liberals say the unemployment rate is actually___than the BLS says it is, conservatives say it really is____.
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higher, lower
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between the mid 1970s and the mid 1980s, our unemployment rate never dipped below___percent
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6
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the unemployment rate for blacks is about____ times the white unemployment rate
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twice
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the misery index is found by adding the__and the___
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unemployment rate, inflation rate
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the monthly unemployment rate reached a high of about __in 2009
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10%
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during a very severe recession when more than 11% of the labor force is out of work, most of the unemployment is__unemployment
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cyclical
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two exogenous business cycle theories are the __ theory and the __theory
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war, price shock, external demand shock
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according to a.w. phillips there is a trade off between
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price stability, high employment
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if the consumer price index rises from 150 to 180, the cost of living rose by
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20%
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once inflation is under way,___ takes over
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inflationary psychology
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to stop inflation, we need to convince people that
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prices will not keep rising
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in 2009, the rate of inflation was
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2.7%
