Business_cycles_and_keynesian_theory

Business Cycles

Periodic growths and contractions in a country’s economy.

Economic Recession

A period of economic decline characterized by falling GDP and increased unemployment.

Expansion Phase

A phase in the business cycle where the economy is growing, marked by rising employment and consumer spending.

Trough

The lowest point in a business cycle, where economic activity is at its lowest.

Peak

The point in a business cycle where economic activity reaches its highest level before declining.

Depression

A prolonged period of economic downturn characterized by sustained high unemployment and low consumer demand.

Keynesian Theory

A macroeconomic theory stating that government intervention can help stabilize economic cycles by managing demand.

Aggregate Demand

The total demand for goods and services within a particular market.

Potential Output

The maximum production an economy can achieve when all factors of production are fully employed.

Okun’s Law

An observed relationship between unemployment and losses in a country's production.

Marginal Propensity to Consume (MPC)

The proportion of additional income that a household consumes rather than saves.

Counter-cyclical Policies

Economic policies aimed at reducing the severity of business cycle fluctuations.

Inflation

The rate at which the general level of prices for goods and services rises, eroding purchasing power.

Fiscal Policy

Government spending and taxation policies used to influence economic conditions.

Monetary Policy

Central bank actions that define the size and rate of growth of the money supply.

Animal Spirits

A term coined by Keynes referring to the instincts and emotions influencing human behavior in economic decisions.

Synchronization of Business Cycles

The phenomenon where recessions and recoveries occur simultaneously in different economies due to globalization.

Full Employment

A situation in which all individuals who are willing and able to work at prevailing wage rates are employed.

Consumer Confidence

An indicator that measures the degree of optimism that consumers feel about the overall state of the economy.

Economic Boom

A period of significant economic growth characterized by high demand, low unemployment, and rising prices.

Income in Full Employment

The output level that corresponds to an economy where all resources are used efficiently.

Keynesian Cross

A graphical representation of equilibrium in the economy showing total expenditures equal to income.

Disposable Income

The amount of money that individuals have available for spending and saving after taxes have been deducted.

Equilibrium Production

The level of output where aggregate demand equals aggregate supply.

Financial Crisis

A situation in which the value of financial institutions or assets drops rapidly.

Unemployment Rate

The percentage of the labor force that is jobless and actively seeking employment.

Phillips Curve

An economic concept that indicates an inverse relationship between rates of unemployment and corresponding rates of inflation.