Chapter 14: Business cycles and fluctuations
a+0.95 (DI)
C=?
C+I+G+(X-M)
GDP= ?
North Sea oil
Great Britain
greasing the wheels of commerce
a certain amount is necessary
econometric model
a macroeconomic model that uses algebraic equations to describe how the economy behaves
index of leading indicator
a monthly statistical series that usually turns down before GDP turns up
galloping inflation
a more intense form of inflation that can go as high as 100 to 300 to percent
recession
a period during which real GDP declines for 2 quarters in the row, or 6 consecutive months
expansion
a period of recovery from a recession
depression
a state of the economy with large numbers of people out of work, acute shortages and excess capacity in manufacturing plants
Black Tuesday
beginning of Great Depression, October 29, 1929
inflation
breeds inflation
prices are pulled up by excessive demand, federal government's deficit, rising input costs,excessive monetary growth
causes of inflation
inflation rate
change in price level/ beginning price level*100
inventory adjustment
changes in the level of business inventories
depression scrip
currency issued by towns, chambers of commerce, and other civic bodies during the Great Depression
deflation
decrease in the general price level
disparity in the distribution of income, easy and plentiful credit, global economic conditions, high American tariff
factors contributed to the Great depression
capital expenditure, inventory adjustments, innovation and imitation, monetary factors, external shocks
factors create a cycle
1929-1933
great depression
trend line
growth path the economy would follow if it were not interrupted bu alternating periods of recession and recovery
cost of living index
how much it costs you to live
external shocks
increase in oil prices, international conflicts
incentive
inflation gives an ... to invest rather than just save
creeping inflation
inflation in the range of 1 to 3 years percent per year
hyperinflation
inflation tn the range of 500 percent a year and above
frictional unemployment, structural unemployment, cyclical unemployment, seasonal unemployment, technological unemployment
kinds of unemployment
business cycles
largely systematic ups and downs of real GDP
producer price index
measures the price of a certain group of good bought by the producers
consumer price index
measures the prices of a certain group of goods bought by the typical consumer
macroeconomic modeling, statistical predictors
one of the popular technique to predict business cycles
unemployed
people available for work who made a specific effort to find a job during the past month and who during the most recent survey week, work less than one hour for pay or profit
hyperinflation
prices in increase extremely rapidly as a currency loses its value
automation
production with mechanical or other processes that reduce the need for workers
tax
punishment on spending
11/43
recession/ expansion during World War 2
monetary factors
the credit and loan policies of the Federal Reserve system
1991
the expansion in ...is the longest expansion in the United States
full employment
the lowest possible unemployment rate with the economy growing and all factors of production being used as efficiently as possible
unemployment rate
the number of unemployed individuals divided by the total number of persons in the civilian labor force
peak
the point where real GDP stops going up
price level
the relative magnitude of prices at one point in time
business fluctuation
the rise and fall of real GDP over time in a non-systematic manner
trough
the turnaround point where real GDP stops going down
great depression
the worst and most prolonged downturn was .... in 1930
bank holiday
to prevent panic withdrawals, the federal government declared ... in March of 1933
frictional unemployment
unemployment caused by workers who are between jobs for one reason or another
technological unemployment
unemployment caused when workers with less skills, talent, or education are replaced by machines and other equipment that do their jobs
cyclical unemployment
unemployment directly related to swings in the business cycle
seasonal unemployment
unemployment resulting from changes in the weather or changes in the demand for certain products
structural unemployment
unemployment that occurs when a fundamental change in the operations of the economy reduces the demand for workers and their skills
demand pull
when aggregate demand in an economy outpaces aggregate supply
cost push
when costs that producers incur cause the prices to rise
stagflation
when there is both high inflation and high unemployment
wage price spiral
workers ask for raises, causing money supply increase, causing inflation, causing workers to ask for raises
deflation
would be destructive- causing bankruptcy, unemployment, and recession
