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Business Cycle
Recurring ups and downs in the level of economic activity.
The phase in the business cycle characterized by high production (real GDP), full unemployment, and inflation.
An increase in the overall level of most prices in an economy.
The highest point in an economic expansion.
The phase in the business cycle characterized by declining levels of real GDP, moderating rates of inflation, and emerging levels of unemployment.
The lowest point in an economic contraction. Real GDP stops falling at this point.
The phase in the business cycle characterized by a period of decline in the level of output, employment, and income lasting six or more months. Prices may fall.
Severe, deep, and long lasting recession.
The phase in the business cycle characterized by a period of increasing real GDP and decreasing rates of unemployement. Follows a recession.
Trend Line
The upward-sloping shape of the trend line shows economic growth from peak to peak. If an economy is not growing, the trend line would be horizontal.
Gross Domestic Product
GDP – Gross Domestic Product is the total dollar value of all goods and services produced, in final form, within the domestic borders of the United States, regardless of the national origin of the producing firm.
Nominal GDP
A measure of GDP in which the quantities produced are valued at current-year prices; measure current dollar value of production. Nominal GDP has not been adjusted for inflation.
Real GDP
GDP that has been adjusted for price changes; GDP measured in base-year, or constant, prices. Real GDP has been adjusted for changes in the price level (adjusted for inflation.)
Consumer Price Index
CPI – The Consumer Price Index is an index number measuring the average price of consumer goods and services purchased by households. It is one of several price indices calculated by national statistical agencies. The percent change in the CPI is a measure of inflation. The CPI can be used to index (i.e., adjust for the effects of inflation) wages, salaries, pensions, or regulated or contracted prices. The CPI is, along with the population census and the National Income and Product Accounts, one of the most closely watched national economic statistics.
Base Year
The year serving as a point of comparison for other years in a price index.
Price Level
A measure of prices in one year expressed in realtions to prices in the base year.
GDP Deflator
A measure of the level of prices of all final goods and services (consumer goods, investment goods, and government) produced by the economy in a base year.
Aggregate Supply
The total quantity of output supplied over varying prices by all sectors in the economy together in a given time period.
Aggregate Demand
The total demand for goods and services over varying prices within the economy, including componenting such as household consumption, business investment, government spending & net exports.
The level of real GDP and the price level at which aggregate quantity demanded equals aggregate quantity supplied.
Demand Pull Inflation
Inflation caused primarily by excess aggregate demand. Consumer driven inflation – consumers are trying to spend more economy can produce.
Cost-Push Inflation
Inflation caused primarily by decreases in aggregate supply. Economy wide reduction in supply of an item drives up or “pushes” price up.
A period of slow economic growth and high unemployment (stagnation) while prices rise (inflation). Prevelent during the 1970’s and 1980’s.

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