MacroEconomics Ch7 – Flashcards
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Unemployment
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the number of adults who are actively looking for work but do not have a job
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Labor Force
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individuals aged 16 years or older who either have jobs or who are looking and available for jobs; the number of employed + number unemployed
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Stock
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The quantity of something measured at a given point in time; defined independently of time
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Flow
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A quantity measured per unit of time; something that occurs over time, such as the income you make per week
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Job Loser
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An individual in the force whose employment was involuntarily
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Reentrant
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An individual who used to work full-time but left the labor force and has now reentered it looking for a job
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Job Leaver
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An individual in the labor force who quits voluntarily
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New entrant
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An individual who has never held a full-time job lasting two weeks or longer but is now seeking employment
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The increase in the ________ of unemployment causes a decrease in _________ _________
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duration; business activity
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Discouraged workers
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Individuals who have stopped looking for a job because they are convinced that they will not find a suitable one
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Labor force participation rate
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The percentage of non institutionalized working-age individuals who are employed or seeking employment
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"semi-hidden" unemployed
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people who work part-time but are willing to work full-time
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4 types of unemployment
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Frictional, Structural, Cyclical, Seasonal
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Frictional Unemployment
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Unemployment due to the fat that workers must search for appropriate job offers. This activity takes time so they remain temporarily unemployed
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Structural Unemployment
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Unemployment resulting from a poor match of worker's abilities and skills with current requirements or employers
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Cyclical unemployment
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Unemployment resulting from business recessions that occur when aggregate (total) demand is insufficient to create full employment
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Seasonal unemployment
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Unemployment resulting from the seasonal pattern of work in specific industries. It is usually due to seasonal fluctuations in demand or to changing weather conditions that render work difficult, if not impossible, as in the agriculture, construction, and tourist industries.
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Full unemployment
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An arbitrary level of unemployment that corresponds to "normal" friction in the labor market
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Natural Rate of Unemployment
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The rate of unemployment that is estimated to prevail in long-run macroeconomic equilibrium, when all workers and employers have fully adjusted to any changes in the economy
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Inflation
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A sustained in the average of all prices if goods and services in an economy
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Deflation
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A sustained decrease in the average of all prices of goods and services in an economy
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Purchasing Power
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The value of money for buying goods and services. If your money income stays the same but the price of one good that you are buying goes up, your effective purchasing power falls, and vice versa
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Price index
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The cost of today's market basket of goods expressed as a percentage of the cost of the same market basket during a base year
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price index equation
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Price index = (cost of market basket today)/(cost of market basket in base year) x 100
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Base Year
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The year that is chosen as the point of reference for comparison of prices in other years
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Consumer Price Index
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A statistical measure of a weighted average if prices of a specified set of goods ans services purchased by typical consumers in urban areas
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Producer Price Index
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A statistical measure of a weighted average of prices of goods and services that firms produce and sell
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GDP deflator
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A price index measuring the changes in prices of all new goods and services produces in the economy
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Personal Consumption Expenditure Index
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A statistical measure of average prices that uses annually updated weights based on surveys of consumer spending
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Anticipated Inflation
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The inflation rate that we believe will occur; when it does, we are in a situation of fully anticipated inflation
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Unanticipated inflation
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Inflation at a rate that comes as a surprise, either higher or lower than the rate anticipated
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Nominal rate of interest
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The market rate of interest observed on contracts on contracts expressed in today's dollars
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Real rate of interest
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The nominal rate of interest minus the anticipated rate of inflation
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Cost-of-living-adjustments (COLAs)
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Clauses in contracts that allow for increase in specified nominal values to take account of changes in the cost of living
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Repricing/menu, cost of inflation
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The cost associated with recalculating prices and printing new price lists when there us inflation
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Business fluctuations
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The ups and downs in business activity throughout the economy
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Expansion
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A business fluctuations in which the pace of rational economic activity is speeding up
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Contraction
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A business fluctuations during which the pace of national economic activity is slowing down
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Recession
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A period of time during which the rate of growth is consistently less than its long-term trend or is negative
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Depression
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An extremely severe recession
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Leading indicators
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Events that have been found to occur before changes in business activity
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The ups and downs in economywide business activity are called _______ ________, which consist of expansion and contraction in overall activity
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Business fluctuations
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The lowest point of a contradiction is called the _________
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trough
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The highest point of a contradiction is called the ________
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Peak
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A _________ is a downturn in business activity for some length of time
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recession
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One possible explanation for business fluctuations relates to ________ ________, such as wars, dramatic increase in the prices of raw materials, and earth quakes, floods, and droughts
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recession; external shocks
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Once we pick a market basket of goods, we can construct a price index that compares the cost of that market basket today with the cost of the same market basket in a ________ year
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base
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The __________ _________ Index is the most often used price index in the United States. The Producer Price Index is also widely mentioned
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Consumer Price
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The __________ _________ measures what is happening to the average price level of all new, domestically produced final goods and services in our economy
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GDP deflator
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The ________ _________ _________ Index uses annually updated weights from consumer spending surveys to measure average prices faced by consumers
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Personal Consumption Expenditure
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Whenever inflation is ________ than anticipated creditors love and debtors gain. Whenever the rate of inflation is _______ than anticipated, creditors gain and debtors lose
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greater; less
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Holders of each lose during periods of inflation because the ________ _______ of their cash depreciates at a rate of inflation
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purchasing power
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Households and business spend resources in attempting to protect themselves against the prospect of inflation, thus imposing a _________ cost on the economy
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resource
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________ unemployment occurs because of transaction costs in the labor market. For example, workers do not have full information about vacancies and must search for jobs
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