Studied by 2 peoplepeak
business activity has reached a temporary maximum
recession
declining real GDP accompanies by lower real income and higher unemployment
trough
business cycle has reached a temporary minimum
expansion
real GDP, income, and unemployment rise
labor force
people 16 years and older who are employed or unemployed and seeking work
unemployment rate
percentage of the labor force unemployed at a time
frictional unemployment
unemployed workers between jobs
structural unemployment
workers whose skills are either not wanted or lacking to obtain employment (also those who cannot easily move)
cyclical unemployment
insufficient total spending (or by insufficient total aggregate demand)
GDP gap
actual GDP minus the potential GDP that can be a positive or a negative amount
okun's law
generalization that a 1% point rise in the unemployment rate above the full employment rate of unemployment is associated with a rise in the negative GDP gap by 2% of potential output
consumer price index
measures the prices of the fixed "market basket" of some 300 goods/services bought by a "typical" consumer
demand pull inflation
caused by an increase in aggregate demand
cost push inflation
caused by an increase in aggregate supply
hyperinflation
a very rapid rise in the price level
irregular innovation, productivity changes, monetary factors, political events, and financial instability
possible general sources that can influence business cycles
durable goods suffer more in a recession, durable-capital, nondurable-service
what is the difference between durable and nondurable goods
the difference between actual GDP and potential GDP; actual GDP - potential GDP = GDP gap
what is a GDP gap and how do you calculate it
you use nominal income to find the real income which is a measure of amount of goods/services nominal income can buy
what is the difference between nominal and real income
fixed income receivers, savers, and creditors
3 key categories of people that are hurt by inflation
flexible income receivers and debtors
people who are helped by inflation
real interest rate + inflation premium = nominal interest rate
what is the formula for calculating the nominal interest rate
Note
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