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Chapter 26 ~ Business Cycles, Unemployment, and Inflation

What phases do the United States and other industrial economies have in common?
Peak, recession, trough, and expansion.
What are the immediate causes of fluctuating real output and employment?
The immediate causes of fluctuating real output and employment are changes in the level of total spending.
How is the GDP gap found?
The GDP gap is found by subtracting potential GDP from actual GDP.
Which law suggests that every 1-percentage-point increase in unemployment above the natural rate causes an additional 2 percent negative GDP gap?
Okun’s law
What is inflation?
Inflation is a rise in the general price level.
How is inflation measured in the United States?
Inflation is measured in the U.S. by the Consumer Price Index (CPI).
What causes demand-pull and cost-push inflations?
Demand-pull inflation results from an excess of total spending relative to the economy’s capacity to produce.
The cause of cost-push inflation is abrupt and rapid increases in the prices of key resources.
List the three general types of unemployment?
Frictional unemployment
Structural unemployment
Cyclical unemployment
The unemployment rates by demographic group (decreased / increased) between 2007 (full employment year) and 2009 (recession year).
Increased
What general sources of shocks did Economists cite; that can cause business cycles?
Irregular innovation; productivity changes; monetary factors; political events; and financial instability.

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