question

The United States and other industrial economies have gone through periods of fluctuations in real BLANK, BLANK, and the BLANK level. Although they have certain phases in common—peak, recession, trough, expansion—business cycles vary greatly in duration and intensity.

answer

GDP, employment, price

question

Although economists explain the business cycle in terms of underlying causal factors such as major innovations, productivity shocks, money creation, and financial crises, they generally agree that changes in the level of total spending are the immediate causes of fluctuating real BLANK and BLANKMENT.

answer

output, employment

question

The business cycle affects all sectors of the economy, though in varying ways and degrees. The cycle has greater effects on output and employment in the BLANK goods and BLANK BLANK goods industries than in the BLANKS and BLANK BLANKS industries.

answer

capital, durable consumer, services, nondurable goods

question

Economists distinguish between frictional, structural, and cyclical unemployment. The full-employment or BLANK rate of unemployment, which is made up of BLANKAL and BLANKAL unemployment, is currently between 4 and 5 percent. The presence of part-time and discouraged workers makes it difficult to measure unemployment accurately.

answer

natural, frictional, structural

question

The GDP gap, which can be either a positive or a negative value, is found by subtracting BLANK GDP from BLANK GDP. The economic cost of unemployment, as measured by the GDP gap, consists of the goods and services forgone by society when its resources are involuntarily idle. BLANK'S law suggests that every 1-percentage-point increase in unemployment above the natural rate causes an additional 2 percent negative GDP gap.

answer

potential, actual, Okun's

question

Inflation is a rise in the general price level and is measured in the United States by the BLANK BLANK BLANK (CPI). When inflation occurs, each dollar of income will buy fewer goods and services than before. That is, inflation reduces the purchasing power of money. Deflation is a decline in the general price level.

answer

Consumer Price Index

question

Unemployment rates and inflation rates vary widely globally. Unemployment rates differ because nations have different BLANK rates of unemployment and often are in different phases of their BLANK BLANKS. Inflation and unemployment rates in the United States recently have been in the middle to low range compared with rates in other industrial nations.

answer

natural, business cycles

question

Economists discern both demand-pull and cost-push (supply-side) inflation. Demand-pull inflation results from an BLANK of total spending relative to the economy's capacity to produce. The main source of cost-push inflation is abrupt and rapid increases in the prices of BLANK resources. These supply shocks push up per-unit production costs and ultimately raise the prices of consumer goods.

answer

excess, key

question

Unanticipated inflation arbitrarily redistributes BLANK BLANK at the expense of fixed-income receivers, creditors, and savers. If inflation is anticipated, individuals and businesses may be able to take steps to lessen or eliminate adverse redistribution effects.

answer

real income

question

When inflation is BLANKED, lenders add an inflation premium to the interest rate charged on loans. The nominal interest rate thus reflects the real interest rate plus the inflation premium (the expected rate of inflation).

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anticipated

question

Cost-push inflation reduces real output and employment. Proponents of zero inflation argue that even mild demand-pull inflation (1 to 3 percent) reduces the economy's BLANK BLANK. Other economists say that mild inflation may be a necessary by-product of the high and growing spending that produces high levels of output, full employment, and economic growth.

answer

real output

question

BLANK, caused by highly imprudent expansions of the money supply, may undermine the monetary system and cause severe declines in real output.

answer

Hyperinflation

question

Recurring increases and decreases in the level of economic activity over periods of years; consists of peak, recession, trough, and expansion phases.

answer

business cycles

question

The point in a business cycle at which business activity has reached a temporary maximum; the economy is near or at full employment and the level of real output is at or very close to the economy's capacity.

answer

peak

question

A period of declining real GDP, accompanied by lower real income and higher unemployment.

answer

recession

question

The point in a business cycle at which business activity has reached a temporary minimum; the point at which a recession has ended and an expansion (recovery) begins.

answer

trough

question

A phase of the business cycle in which real GDP, income, and employment rise.

answer

expansion

question

Persons 16 years of age and older who are not in institutions and who are employed or are unemployed and seeking work.

answer

labor force

question

The percentage of the labor force unemployed at any time.

answer

unemployment rate

question

Employees who have left the labor force because they have not been able to find employment.

answer

discouraged workers

question

A type of unemployment caused by workers voluntarily changing jobs and by temporary layoffs; unemployed workers between jobs.

answer

frictional unemployment

question

Unemployment of workers whose skills are not demanded by employers, who lack sufficient skill to obtain employment, or who cannot easily move to locations where jobs are available.

answer

structural unemployment

question

A type of unemployment caused by insufficient total spending (or by insufficient aggregate demand).

answer

cyclical unemployment

question

The unemployment rate at which there is no cyclical unemployment of the labor force; equal to between 4 and 5 percent in the United States because some frictional and structural unemployment is unavoidable.

answer

full-employment rate of unemployment

question

The full-employment rate of unemployment; the unemployment rate occurring when there is no cyclical unemployment and the economy is achieving its potential output; the unemployment rate at which actual inflation equals expected inflation.

answer

natural rate of unemployment (NRU)

question

The real output (GDP) an economy can produce when it fully employs its available resources.

answer

potential output

question

Actual gross domestic product minus potential output; may be either a positive amount (a positive GDP gap) or a negative amount (a negative GDP gap).

answer

GDP gap

question

The generalization that any 1-percentage-point rise in the unemployment rate above the full-employment rate of unemployment is associated with a rise in the negative GDP gap by 2 percent of potential output (potential GDP).

answer

Okun's law

question

A rise in the general level of prices in an economy.

answer

inflation

question

A decline in the economy's price level.

answer

deflation

question

An index that measures the prices of a fixed "market basket" of some 300 goods and services bought by a "typical" consumer.

answer

Consumer Price Index (CPI)

question

Increases in the price level (inflation) resulting from an excess of demand over output at the existing price level, caused by an increase in aggregate demand.

answer

demand-pull inflation

question

Increases in the price level (inflation) resulting from an increase in resource costs (for example, raw-material prices) and hence in per-unit production costs; inflation caused by reductions in aggregate supply.

answer

cost-push inflation

question

The average production cost of a particular level of output; total input cost divided by units of output.

answer

per-unit production costs

question

The underlying increases in the price level after volatile food and energy prices and removed.

answer

core inflation

question

The number of dollars received by an individual or group for its resources during some period of time.

answer

nominal income

question

The amount of goods and services that can be purchased with nominal income during some period of time; nominal income adjusted for inflation.

answer

real income

question

Increases in the price level (inflation) at a rate greater than expected.

answer

unanticipated inflation

question

Increases in the price level (inflation) that occur at the expected rate.

answer

anticipated inflation

question

An automatic increase in the incomes (wages) of workers when inflation occurs; guaranteed by a collective bargaining contract between firms and workers.

answer

cost-of-living adjustments (COLAs)

question

The interest rate expressed in dollars of constant value (adjusted for inflation) and equal to the nominal interest rate less the expected rate of inflation.

answer

real interest rate

question

The interest rate expressed in terms of annual amounts currently charged for interest and not adjusted for inflation.

answer

nominal interest rate

question

A very rapid rise in the price level; an extremely high rate of inflation.

answer

hyperinflation

Ch.26 Business Cycles, Unemployment, and Inflation – Flashcards

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