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Chp 2: Economic Activity
Terms in this set (23)
Three main causes of inflation
Alternating periods of economic expansion and economic recession
Business cycle graph
A recession is when the economy declines significantly for at least six months. That means there's a drop in the following five economic indicators: real GDP, income, employment, manufacturing, and retail sales. People often say a recession is when the GDP growth rate is negative for two consecutive quarters or more.
A depression is a severe and prolonged downturn in economic activity. In economics, a depression is commonly defined as an extreme recession that lasts two or more years. A depression is characterized by economic factors such as substantial increases in unemployment, a drop in available credit, diminishing output, bankruptcies and sovereign debt defaults, reduced trade and commerce, and sustained volatility in currency values. In times of depression, consumer confidence and investments decrease, causing the economy to shut down.
Prosperity in the business cycle which most people who want to work are working; businesses are producing goods and services at its maximum limit. GDP is growing; people have confidence sell and buying. Prosperity does not go on forever. Also known as the peak; the economic factors, such as production, profit, sales, and employment, are higher, but do not increase further. In peak phase, there is a gradual decrease in the demand of various products due to increase in the prices of input.
A rise in business activity after a recession or depression; unemployment begins to decrease, demands for goods and services increase and GDP begins to rise again, people gain employment, consumers regain confidence about their futures and begin buying again.
Gross Domestic Product- the total market value of all final goods and services produced annually in an economy
Per capita output formula
GDP /divide by Populaiton
Components of GDP
Exports - Imports
employment and productivity
Measures the number of people who have a job as a percentage of the working age (16 and over) population.
Measures the number of people who are able, willing, and looking for work but unable to find a job.
The production output in relation to a unit of input, such as a worker; improvements in capital resources, worker training, management that results in more output per worker.
The money your earn and spend in a home.
Salaries and wages as well as investment income and government payments to individuals
the sales of durable and nondurable goods bought by consumers
Main items of retail sales
automobiles, building materials, furniture, gasoline, clothing..... services from restaurants, department stores, food and drug stores.
a general increase in prices and fall in the purchasing value of money.
a decrease in the general level of prices
a number that compares prices in one year with some earlier base year
The cost of borrowing money
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