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Economics Lesson 4(2)

Aggregate demand
Total demand for an economy’s goods and services
Business cycles
Periods of expansion and contraction in economic activities
Capital goods
Manufactured or constructed items that are used to produce goods and services
Consumption
The process or activity of using goods and services
Contraction
The phase of the business cycle characterized by decreased demand for goods and services, rising unemployment, increased saving by consumers, and reduced sales and profits for businesses
Demand-pull inflation
A rapid rise in prices that occurs when aggregate demand exceeds supply
Depression
A severe, long-lasting recession characterized by high rates of unemployment and business failures
Distribution
The process or activity by which income is divided among resource owners and producers
Durable goods
Tangible items that should last a long time
Economic activities
Consumption, production, exchange, and distribution
Exchange
The process of trading one good/service for another
Expansion
The stage of the business cycle characterized by increased spending and borrowing, increased demand for goods and services, increased employment rates, and decreased interest rates on loans
Federal Reserve System
The central banking organization of the United States that monitors and regulates the flow of credit and money
Fiscal policy
The government policy that sets levels of government spending and taxation
Gross domestic product (GDP)
The final market value of the total output of all goods and services produced within a country’s geographic boundaries during a year’s time
Inflation
A rapid rise in prices that may occur when demand exceeds supply or when productivity declines and costs of labor go up
Innovation
Something new, such as a new product, strategy, or process
Leading economic indicators
Statistical measures that signal the likely future movement of the economy; typically rise or fall three to 12 months prior to the rest of the economy
Monetary policy
The government policy that determines the amount of money that will be in circulation and the level of interest rates
Money supply
The total quantity of money that exists at one time in the nation
Peak
The phase of the business cycle considered the high point of economic activity when demand begins to exceed the production capacities of producers
Real GDP
The final market value, adjusted for inflation, of the total output of all goods and services produced within a country’s geographic boundaries during a year’s time
Recession
A six-months’ contraction in GDP
Standard of living
The general conditions in which people live; quality of life
Trough
The phase of the business cycle considered the low point of economic activity; characterized by high rates of unemployment and business failures

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