Ch. 6 Macro

Recession

A downturn in the business cycle during which real GDP declines, and the unemployment rate rises. Also called a contraction.

Structural Unemployment

A mismatch of the skills of workers out of work and the skills required for existing job opportunities.

Business Cycle

Alternating periods of economic growth and contraction, which can be measured by changes in real GDP.

Economic Growth

An expansion in national output measured by the annual percentage increase in a nation's real GDP.

Recovery

An upturn in the business cycle during which real GDP rises. Also called an expansion.

Frictional Unemployment

Normal search time required by workers with marketable skills who are changing jobs, entering, or re-entering the labor force, or seasonally unemployed.

Civilian Labor Force

People 16 years or older who are either employed or actively seeking a job, excluding members of the armed forces, homemakers, and people in institutions.

Underemployment

People working at jobs below their level of skills.

GDP Gap

The difference between actual real and full-employment real GDP.

Unemployment Rate

The percentage of people in the civilian labor force who are without jobs and are actively seeking jobs.

Peak

The phase of the business cycle during which real GDP reaches its maximum after rising during a recovery.

Trough

The phase of the business cycle in which real GDP reaches its minimum after falling during a recession.

Cyclical Unemployment

Unemployment caused by the lack of jobs during a recession.

Coincident Indicator

Variables that change at the same time that real GDP changes.

Leading Indicator

Variables that change before real GDP changes.

Full Employment

When an economy operates at an unemployment rate equal to the sum of frictional and structural unemployment rates. Also called the natural rate of unemployment.