Econ 101 – Flashcards
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Business cycle
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Alternating periods of economic growth and contraction, whcih can be measured by changes in real GDP.
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Peak
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The phase of the business cycle in which real GDP reaches its maximum after rising during a recovery.
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Recession
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A downturn in the business cycle during which real GDP declines, and the unemployment rate rises. Also called a contraction.
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Trough
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The phase of the business cycle in which real GDP reaches its minimum after falling during a recession.
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Expansion
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An upturn in the business cycle during which real GDP rises; also called a recovery.
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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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Leading indicators
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Variables that change before real GDP changes
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Real GDP growth rates in other countries
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China and India had the largest rates of growth at 10.3 percent. The U.s and other western industrial countries in the exhibit had lower growth rates.
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Business Cycle indicators
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Leading indicators, coincident indicator and lagging indicators.
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Unemployment rate
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The percentage of people in the civilian labor force who are without jobs and are actively seeking jobs. Unemployment rate = unemployed / civilian labor force X 100
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Civilian labor force
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The number of people 16 years of age and older who are employed or who are actively seeking a job, excluding members of the armed forces, homemakers, discouraged workers, and other persons not in the labor force.
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Discouraged worker
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A person who wants to work, but who has given up searching for work because he or she believes there will be no job offers.
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Frictional unemployment
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Temporary unemployment caused by the time required of workers to move from one job to another.
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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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Outsourcing
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The practive of a company having its work done by another company in another country
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Offshoring
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The practice of having work for a company performed by the company's employees located in another country.
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Cyclical unemployment
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Unemployment caused by the lack of jobs during a recession.
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Full employment
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The situation in which an economy operates at an unemployment rate equal to the sum of the frictional and structural unemployment rates. Also called the natural rate of unemployment.
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GDP gap
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The difference between actual real GDP and potential or full-employment real GDP.
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Formula for Full employment (potential real GDP)
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GDP gap = actual real GDP - potential real GDP
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A general rule is that economy is experiencing a recession when
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real GDP declines for at least six months.
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A character who takes his own life because of poor job prospects. If he was an unemployed person who gave up looking for work, he would be considered what kind of worker
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A discouraged worker.
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Unemployment that is of a short duration to allow time to find a new job is
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Frictional unemployment
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A person who voluntarily quits his or her job in NY and expcts to get a similar job in LA is an example of?
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frictional unemployment.
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Frictional unemployment refers to?
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Short periods of unemployment needed to match jobs and job seekers.
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Sam is a musician who is out of work because electronic equipment replaced live musicians. This is an example of?
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Structural unemployment
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Louise is unemployed due to a decrease in the demand for workers with a knowledge of a certain word processing language. This is an example of?
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Structural unemployment
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Consider a broom factory that permanently closes because of foregn competition. If the broom factory's workers cannot find new jobs because their skills are no loner marketable, then they are classified as?
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Structurally unemployed.
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The increase in unemployment associated with a recession is called?
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Cyclical unemployment.
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GDP gap
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Is the difference between fullemployment real GDP and actual real GDP. We desire economic growth because it increases the nation's standard of living. Economic growth is measured by the annual percentage increase in a nation's real GDP. Discouraged workers are a reason critics say the unemployment rate is unerstated.
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What statge of the business cycle immediately follows the trough?
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Recovery
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What does the government's chief forecasting gauge for business cycles is the?
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Index of leading indicators.
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Examples of lagging indicators
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Duration of unemployment, commercial and industrial loans, prime rate.
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Suppose the offical unemployment rate is ten percent. We can conclude without question that?
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One of every ten people in the civilian labor force is currently unemployed.
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Sally lost her job when her company went out of business because of a recession. This is an example of what kind of unemployment?
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Cyclical unemployment.
