question

frictional unemployment

answer

unemployment that occurs when people take time to find a job

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seasonal unemployment

answer

unemployment that occurs as a result of harvest schedules or vacations, or when industries slow or shut down for a season

question

structural unemployment

answer

unemployment that occurs when workers' skills do not match the jobs that are available

question

structural unemployment

answer

unemployment that occurs when workers' skills do not match the jobs that are available

question

cyclical unemployment

answer

unemployment that rises during economic downturns and falls when the economy improves

question

census

answer

population count

question

unemployment rate

answer

the percentage of the labor force that is unemployed

question

full employment

answer

the level of employment reached when there is no cyclical unemployment

question

underemployment

answer

workers are overqualified for their jobs or work fewer hours than they would prefer

question

discouraged worker

answer

a person who wants a job but has given up looking

question

inflation

answer

a general and progressive increase in prices

question

purchasing power

answer

a comparison of income versus the relative cost of a set standard of goods and services in different geographic areas

question

price index

answer

an index that traces the relative changes in the price of an individual good (or a market basket of goods) over time

question

CPI

answer

an index of the cost of all goods and services to a typical consumer

question

market basket

answer

a representative collection of goods and services

question

inflation rate

answer

the rate of change of prices (as indicated by a price index) calculated on a monthly or annual basis

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chronic inflation

answer

Inflation that rises steadily from month to month over a long period.

question

hyperinflation

answer

When the German economy tried to print bills to pay off their debt, inflation rates of 40% a day

question

quantity theory

answer

theory that too much money in the economy causes inflation

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demand pull theory

answer

theory that inflation occurs when demand for goods and services exceeds existing supplies

question

cost push theory

answer

theory that inflation occurs when producers raise prices in order to meet increased costs

question

wage price spiral

answer

the process by which rising wages cause higher prices, and higher prices cause higher wages

question

fixed income

answer

an income that does not increase even though prices go up

question

deflation

answer

the act of letting the air out of something

question

poverty threshold

answer

an income level below that which is needed to support families or households

question

poverty rate

answer

percentage of people whose income falls below the poverty line

question

income distribution

answer

the way all the income earned in a country is divided among different groups of income earners

question

food stamps

answer

government coupons that can be used to purchase food

question

lorenz curve

answer

the curve that illustrates income distribution

question

enterprise zone

answer

a city district where development receives special tax advantages

question

block grant

answer

a grant of federal money to state and local governments to support social welfare programs

question

workfare

answer

programs that require welfare recipients to exchange some of their labor in return for benefits

question

National Income Accounting

answer

a system that collects macroeconomic statistics on production, income, investment, and savings

question

Gross Domestic Product (GDP)

answer

the dollar value of all final goods and services produced within a country's boarders in a given year

question

Intermediate Goods

answer

goods used in the production of final goods

question

Durable Goods

answer

goods that last for a relatively long time, such as refrigerators, cars, and DVD players

question

Nondurable Goods

answer

goods that last a short period of time, such as food, light bulbs, and sneakers

question

Nominal GDP

answer

GDP measured in current prices. It is not corrected for inflation.

question

Real GDP

answer

values output using the constant prices of a base year. It is corrected for inflation.

question

Gross National Product (GNP)

answer

the annual income earned by US-owned firms and US citizens

question

Depreciation

answer

the loss of the value of capital equipment that results from normal wear and tear

question

Price Level

answer

the relative cost of goods and services in the entire economy at a given point in time

question

Aggregate Supply

answer

the total amount of goods and services in the economy at all possible price levels

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Aggregate Demand

answer

the amount of goods and services in the economy that will be purchased at all possible price levels

question

Business Cycle

answer

a period of macroeconomic expansion followed by a period of contraction

question

Expansion

answer

a period of economic growth as measured by a rise in real GDP

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Economic Growth

answer

a steady, long term increase in real GDP

question

Peak

answer

the height of an economic expansion, when real GDP stops rising

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Contraction

answer

a period of economic decline marked by falling real GDP

question

Trough

answer

the lowest point in an economic contraction (decline), when real GDP stops falling

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Recession

answer

a prolonged (6-18 months) economic contraction

question

Depression

answer

a recession that is especially long and severe (high unemployment and low factory output)

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Stagflation

answer

combination of "stagnant" (not moving) and inflation. It is a decline in real GDP combined with a rise in the price level

question

Business Cycles are affected by 4 main economic variables (influences GDP):

answer

1. Business investments 2. Interest rates and credit 3. Consumer expectations 4. External Shock

question

Leading Indicators

answer

key economic variables that economists use to predict a new phase of a business cycle (ex. stock market, interest rates, and new home sales)

question

Real GDP Per Capita

answer

real GDP divided by the total population

question

Capital Deepening

answer

process of increasing the amount of capital per worker. One of the most impt. sources of growth in modern economies

question

Saving

answer

income not used for consumption

question

Savings Rate

answer

the proportion of disposable income that is saved

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Technological Progress

answer

an increase in efficiency gained by producing more output without using more inputs

question

Frictional Unemployment

answer

unemployment that occurs when people take time to find a job. People between jobs. May have quit and are looking. After graduating looking for the best job.

question

Seasonal Unemployment

answer

occurs when industries slow or shut down for a season or make seasonal shifts in their production schedules

question

Structural Unemployment

answer

unemployment that occurs when workers' skills do not match the jobs that are available

question

5 major causes of structural unemployment:

answer

1. Development of new technology 2. Discovery of new resources 3. Changes in consumer demand 4. Globalization 5. Lack of education

question

Cyclical Unemployment

answer

unemployment that rises during economic downturns and falls when the economy improves (ex. waitress)

question

Census

answer

an official count of the population

question

Unemployment Rate

answer

the percentage of the nation's labor force that is unemployed

question

Full Employment

answer

the level of employment reached when there is no cyclical unemployment. normal UE rate: 4-6%

question

underemployed

answer

working at a job for which one is over-qualified, or working part-time when full-time work is desired

question

Discouraged Workers

answer

a person who wants a job, but has given us looking

question

Inflation

answer

a general increase in all prices over time, can distort economic variables like GDP, so we have 2 types. One is right for inflation and one is not.

question

Purchasing Power

answer

the ability to purchase goods and services, is decreased by rising prices. hurts people on fixed incomes

question

Price Index

answer

a measurement that shows how the average price of a standard group of goods changes over time

question

Consumer Price Index (CPI)

answer

determined by measuring the price of a standard group of goods meant to represent the "market basket" of an urban consumer. Computed by the Bureau of Labor Statistics

question

Market Basket

answer

a representative collection of goods and services

question

Inflation Rate

answer

the percentage rate of change in price level over time

question

Core Inflation Rate

answer

the rate of inflation excluding the effects of food and energy prices

question

Hyperinflation

answer

inflation that is out of control

question

Quantity Theory

answer

states that too much money in the economy causes inflation. This can be maintained by increasing the money supply at the same rate the economy is growing

question

Demand-Pull Theory

answer

theory that inflation occurs when demand for goods and services exceeds existing suppliers

question

Cost-Push Theory

answer

inflation occurs when producers raise prices in order to meet increased costs. Can lead to a W-P spiral

question

Wage-Price Spiral

answer

the process by which rising wages cause higher prices, and higher prices cause higher wages

question

Fixed Income

answer

income that does not increase even when price goes up

question

Deflation

answer

a persistent fall in the general level of prices. Creates uncertainty and discourages investment.

question

Macroeconomics

answer

examines the economy as a whole

question

GDP includes goods and services

answer

tangible intangible

question

GDP=

answer

C+I+G+NX (Consumption, Investments, Govt. purchases, and Net exports)

question

Consumption

answer

total spending by household on goods and services

question

Investment

answer

total spending on goods that will be used in the future to produce more goods

question

Government Purchases

answer

all the spending on the goods and services purchased by the govt. at the federal, state, and local levels. (Aircraft carriers and paper clips)--> excludes transfer payments (ex. social security and unemployment)

question

Net Exports

answer

=exports-imports. Exports-represent foreign spending on the US produced goods and services. Imports-are the portions of C,I,and G that are spent on goods and services produced abroad.

question

Physical Capital

answer

Firms increase this by purchasing more equipment

question

Human Capital

answer

firms and employees increase this through additional training and education

question

Innovation

answer

new products and ideas brought to the market can cause output to go up, boosting GDP and bus. profits

question

3 factors that affect growth:

answer

1. Population growth 2. Govt. spending 3. Foreign trade

question

Unemployment Rate=

answer

(unemployed/labor force)

question

Bernanke's take on why deflation is so bad:

answer

1. it kills new investment: bus. can't plan for future and do not invest 2. it places pressure on wages: if bus. receive less, wages don't rise and new hires are paid less 3. value of existing assets: i.e. homes, go down

Prentice Hall economics Chapter 12-13 – Flashcards

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