Economics (Knox) 14.1 – Flashcards
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business cycles
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largely systematic ups and downs of real GDP interrupts economic growth
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business fluctuations
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the rise and fall of real GDP over time in a nonsystematic manner
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expansion
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the recovery from a recession
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recession
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begins with a peak and ends with a trough
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Great Depression
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worst depression in US history caused by excessive borrowing in the 1920s and global economic conditions
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depression
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production slows, output declines, unemployment rises, and the standard of living falls
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businesses
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reduce their capital expenditures once they decide they have expanded enough cut back their inventories at the first sign of an economic slowdown cut back on investment after an innovation takes hold because they fear sales will decline
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econometric models
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macroeconomic models that use algebraic equations to describe how the economy behaves
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index of leading indicators
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a monthly statistical series that helps economists predict the direction of future economic activity
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importance of predicting business cycles
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businesses and the government are better able to plan their actions if they know how the economy is likely to perform
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business cycle/fluctuation
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business cycles are systematic increases and decreases in real GDP unsystematic changes are business fluctuations
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business cycle
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two main phases of a business cycle are recession and expansion causes include capital expenditures, inventory adjustments, innovation and imitation, monetary factors, and external shocks
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business cycle
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two main phases of a business cycle are recession and expansion causes include capital expenditures, inventory adjustments, innovation and imitation, monetary factors, and external shocks
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business cycle
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two main phases of a business cycle are recession and expansion causes include capital expenditures, inventory adjustments, innovation and imitation, monetary factors, and external shocks
