Macro Ch.6

Recession

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

Discouraged worker

A person who wants to work, but has given up searching for work because he or she believes there will be no job offers.

True or false, full employment exists in an economy when the unemployment rate equals the sum of frictional and structural unemployment rates

True

People who are not working will be counted as employed if they are:

on vacation, absent due to weather or absent due to labor dispute

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 nations real gdp.

Recovery

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

Real GDP Equals?

Real GDP equals C plus I plus G plus the sum of X minus M

What stage of the business cycle immediately follows the trough?

Recovery

What is an example of something that is not a lagging indicator

Stock prices

What group has the highest unemployment rates?

Teenagers

GDP Gap

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

What is the conclusion?

The gap between actual and potential real gdp measures the monetary losses of real goods and services to the nation from operating at less than full employment.

Civilian labor force

The number of people 16 and older who are employed or who are actively seeking a job, excluding armed forces, homemakers, discouraged workers, and other persons not in the labor force.

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 in 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.

Full employment

The situation in which an economy operates at an unemployment rate equal to the sum of the frictional and structural unemployment rates. Also called the natural rate of unemployment.

TrueStructural unemployment

Unemployment caused by a mismatch of the skills of workers out of work and the skills required for existing job opportunities

Cyclical unemployment

Unemployment caused by the lack of jobs during a recession.

Frictional unemployment

Unemployment caused by the normal search time required by workers with marketable skills who are changing jobs, initially entering the labor force, reentering the labor force, or seasonally unemployed.

Unemployment rate equals?

Unemployment rate equals unemployed divided by civilian labor force times 100

Lagging indicators

Variables that change after real GDP changes.

Coincedent indicators

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

Leading indicators

Variables that change before real GDP changes

Sally lost her job when her company went out of business because of a recession. This is an example of:

cyclical unemployment

Unemployment caused by a recession is:

cyclical unemployment

the length of time between the peak and the trough is the:

duration of the recession

True or false, the civilian labor force includes only the employed.

false

True or false, the term recovery, refers to the maximum point of the business cycle.

false

True or false, when the actual real GDP output is below full employment real GDP, the GDP measures the cost of cyclical unemployment.

false

The sum of the frictional and structural unemployment rates is equal to the:

full employment unemployment rate

The governments chief forecasting gauge for business cycles is the:

index of leading indicators

What are 4 causes of structural unemployment?

lack of education, changes in consumer demand, technological advances and globalization

Suppose thr official unemployment rate is ten percent we can conclude without question that:

one of every ten people in the civilian labor force is currently unemployed

The phases of a business cycle are:

peak, recession, trough and recovery

Three reasons that the number of people officially unemployed is not the same as the number of people who cant find a job are:

people with jobs look for better ones, armed forces are included, discouraged workers are not counted

What are three coincident indicators?

personal income, industrial production, manufacturing and trade sales

What is an example of something that is not a variable in the index of leading indicators?

prime rate

Structural unemployment is caused by:

shifts in the economy that make certain job skills obsolete

Frictional unemployment applies to:

short periods of unemployment needed to match jobs and job seekers

The economy is considered to be at full employment when:

the rate of cyclical unemployment is zero

True or false, the natural rate of unemployment exists when cyclical unemployment equals zero

true

True or false, to be counted as unemployed, a person must be looking for a job

true