AP Macro Unit 2 Vocab

Business Cycle

Business Cycle

Recurring increases and decreases in the level of economic activity over periods of years; consists of the peak, recession, trough, and expansion phases.

Saving

Disposable income not spent for consumer goods; equal to disposable income- personal consumption expenditures; saving is a flow.

Economic Investment

Spending for the production and accumulation of capital and additions to inventories.

Inflexible Prices

Products prices that remain in place even though supply or demand has changed; stuck prices or sticky prices

Durable Goods

A consumer goods with an expected life (use) of 3 or more years

Disposable Income

Personal income less personal taxes; income available for personal consumption expenditures and personal/saving

Infrastructure

The capital goods usually provided by the public sector for use by citizens and firms (highways, bridges, transit systems)

Peak

The point in a business cycle at which business activity has reached a temporary maximum; the economy is near or at full employment and the level of real output is at or very close to the economy's capacity

Labor Force

People 16 years old or older who are not in institutions and who are employed or are unemployed and seeking work.

Hyperinflation

A very rapid rise in the price level; an extremely high rate of inflation

Recession

A period of decline real GDP, accompanied by lower real income and higher unemployment

Unemployment

The failure to use all available economic resources to produce desired goods and services; the failure of the economy to fully employ its labor force

Expectations

The anticipation of consumers, firms, and others about future economic conditions

Flexible Prices

Product prices that freely move upward or downward when product demand or supply changes

Nondurable Goods

A consumer goods with an expected life (use) of less than 3 years

Price Index

A index number that shows how the weighted-average price of a "market basket" of goods changes over time

Rule of 70

A method for determining the number of years it will take for some measure to double, given its annual percentage increase

Economies of Scale

Reductions in the average total cost of producing a product as the firm expands the size of plant (its output) in the long run; the economies of mass production.

Trough

The point in a business cycle at which business activity has reached a temporary minimum; the point at which a recession has ended and an expansion begins

Demand-Pull Inflation

Increases in the price level (inflation) resulting from an excess of demand over output at the existing price level, caused by an increase in aggregate demand.

Depreciation

A decrease in the value of the dollar relative to another country, so a dollar buys a smaller amount of the foreign currency and therefore of foreign goods

Financial Investment

The purchase of a financial asset or real assets or the building of such assets in the expectation of financial gain.

Shocks

Sudden, unexpected changes in demand or supply

Inventory

Goods that have been produced but remain unsold

National Income Accounting

The techniques used to measure the overall production of the economy and other related variables for the nation as a whole.

Multiple Counting

wrongly including the value of intermediate goods in the gross domestic product; counting the same good or service more than once.

Personal Income

The earned and unearned income available to resource suppliers and others before the payment or personal taxes.

Economic Growth

An increase of real output (GDP) or real output per capita

Expansion

A Phase of the business cycle in which real GDP income, and employment rise

Cost-Push Inflation

Increases in the price level (inflation) resulting from an increase in resource costs and hence in per-unit production costs; inflation caused by reductions in aggregate supply.