Chapter 14: Business cycles and fluctuations

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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


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