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Macroeconomics Exam 1 - Chapter 9
Terms in this set (22)
peak, recession, trough, expansion
what are the phases of the business cycle?
economic shocks, prices are "sticky" downward, economic response entails decreases in output and employment
what are some business cycle fluctuations?
result in slower sales which causes firms to cut back on production, causing the GDP to fall
irregular innovation, productivity changes, monetary factors, political events, financial instability, etc.
name causes of shocks
capital goods and consumer durables
durable goods that are affected most...
servies, food and clothing
nondurable consumer goods that are affected less...
individuals searching for jobs or waiting to take jobs soon
occurs due to changes in the structure of the demand for labor
caused by the recession phase of the business cycle
= actual GDP - potential GDP
this states that every 1% of cyclical unemployment creates a 2% GDP gap
occupations, age, race/ethnicity, gender, education, duration, etc.
name differences in unemployment
excess spanding relative to output; central bank issues too much money (may cause GDP to rise), continues as long as the excess spending continues; one view is that zero inflation is best, another view is that mild inflation is best
due to a rise in per-unit input costs; supply shocks (may cause GDP to fall), ends in recession; reduces real output, redistributes a decreased level of real income
without food and energy goods, focuses on more stable prices, the underlying trend inflation of goods
unadjusted for inflation
nominal income adjusted for inflation
social security recipients, union members with COLAs in contracts
COLAs (cost of living adjustments) protect...
real interest rate
rates adjusted for inflation
nominal interest rate
rates not adjusted fro inflation
incomes may rise, fixed assets values may fall, for fixed-rate mortgages, real debt declines
what are mixed effects of unanticipated inflation
results in economic disasters, extraordinarily rapid inflation, devastates an economy
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