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Economics Chapter 14

business cycles
systematic ups and downs of read GDP
business fluctuations
rise and fall of real GDP over time in a nonsystematic manner
recession
– first phase in a business cycle
– period during which real GDP declines for 2 quarters in a row (6 consecutive months)
peak
point where real GDP stops going up
trough
turnaround point where real GDP stops going down
expansion
period of recovery from a recession
trend line
steady growth path economy would follow if not interrupted by recession and recovery
depression
state of the economy with large numbers of people out of work, acute shortages, and excess capacity in manufacturing plants
depression scrip
currency issued by towns, chambers of commerce, and other civic bodies during the Great Depression
econometric model
macroeconomic model that uses algebraic to describe how the economy behaves
index of leading indicators
– tool used to predict turning points of business cycles
– monthly statistical series that usually turns down before real GDP turns down, and up before real GDP turns up
unemployed
people available for work who made a specific effort to find a job during the past month
unemployment rate
number of unemployed individuals divided by the total number of persons in the civilian labor force
frictional unemployment
unemployment caused by workers who are between jobs (short-term unemployed)
structural unemployment
unemployment that occurs when a fundamental change in the operations of the economy reduces the demand for workers and their skills
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
technological unemployment
unemployment caused when workers with less skills, talent, or education are replaced by machines and other equipment that do their jobs
automation
production with mechanical or other processes that reduce the need for workers
price level
relative magnitude of prices at one point in time
deflation
decrease in the general price level
creeping inflation
inflation in the range of 1 to 3 percent per year
galloping inflation
intense form of inflation that can go as high as 100 to 300 percent
hyperinflation
– when inflation goes totally out of control in the range of 500 percent a year and above
– last stage before a total monetary collapse

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