Chapter 4 Recap: Real GDP, Unemployment, and Inflation

These flashcards cover essential concepts related to Real GDP, unemployment, and inflation as highlighted in the lecture notes.

Real GDP

Adjusts for inflation to reflect the true value of goods and services produced in an economy.

Potential GDP

The maximum output that an economy can produce without causing inflationary pressures.

Business Cycle

The periodic fluctuations in economic activity, consisting of expansions and recessions.

Expansion

A phase of the business cycle where real GDP increases.

Recession

A period in which real GDP declines for at least two successive quarters.

Unemployment Rate

The percentage of the labor force that is unemployed.

Labor Force

The total number of employed and unemployed individuals actively seeking work.

Marginally Attached Workers

Individuals who are not currently in the labor force but desire and are available for employment.

Frictional Unemployment

Temporary unemployment that occurs when people are between jobs or entering the workforce.

Structural Unemployment

Long-term unemployment arising from a mismatch between workers' skills and job requirements.

Cyclical Unemployment

Unemployment correlated with the business cycle, increasing during recessions and decreasing during economic expansions.

Natural Unemployment

The sum of frictional and structural unemployment when there is no cyclical unemployment.

Output Gap

The difference between real GDP and potential GDP, indicating economic performance.

Inflation

The sustained increase in the general price level of goods and services in an economy.

Deflation

The decrease in the general price level of goods and services.

Hyperinflation

An extremely high and typically accelerating inflation rate, often exceeding 50% per month.