Chapter 21 - Short-term economic fluctuations

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31 Terms

1
Peak
________: beginning of a recession; the high point of economic activity prior to a downturn.
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2
Depression
________: particularly severe or protracted recession.
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3
Business cycles
________: short- term fluctuations in GDP and other variables.
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4
Expansion
________: period in which the economy is growing at a rate significantly above normal.
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5
Recession
________= contraction: period in which the economy is growing at a rate significantly below normal.
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6
Business cycles
short-term fluctuations in GDP and other variables
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7
Recession = contraction
period in which the economy is growing at a rate significantly below normal
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8
Depression
particularly severe or protracted recession
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9
Peak
beginning of a recession; the high point of economic activity prior to a downturn
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10
Trough
end of a recession; the low point of economic activity prior to a recovery
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11
Expansion
period in which the economy is growing at a rate significantly above normal
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12
Boom
particularly strong and protracted expansion
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13
**Potential output, Y* (**or potential GDP or full employment output)
maximum sustainable amount of output (real GDP) that an economy can produce
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14
Output gap
difference between the economy's actual output and its potential output, relative to potential output, at a point in time
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15
Recessionary gap
negative output gap, which occurs when potential output exceeds actual output (Y < Y*)
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16
Expansionary gap
positive output gap, which occurs when actual output is higher than potential output (Y > Y*)
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17
Natural rate of unemployment, u*
part of the total unemployment rate that is attributable to frictional and structural unemployment; equivalently, the unemployment rate that prevails when cyclical unemployment is zero, so that the economy has neither a recessionary nor an expansionary output gap
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18
Okun's law
each extra percentage point of cyclical unemployment is associated with about a 2 percent widening of a negative output gap, measured in relation to potential output
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19
Business cycles
Short-term fluctuations in GDP and other variables
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20
Recession = contraction
Period in which the economy is growing at a rate significantly below normal
New cards
21
Depression
Particularly severe or protracted recession
New cards
22
Peak
Beginning of a recession; the high point of economic activity prior to a downturn
New cards
23
Trough
End of a recession; the low point of economic activity prior to a recovery
New cards
24
Expansion
Period in which the economy is growing at a rate significantly above normal
New cards
25
Boom
Particularly strong and protracted expansion
New cards
26
Potential output, Y* (or potential GDP or full employment output)
Maximum sustainable amount of output (real GDP) that an economy can produce
New cards
27
Output gap
Difference between the economy's actual output and its potential output, relative to potential output, at a point in time
New cards
28
Recessionary gap
Negative output gap, which occurs when potential output exceeds actual output (Y < Y*)
New cards
29
Expansionary gap
Positive output gap, which occurs when actual output is higher than potential output (Y > Y*)
New cards
30
Natural rate of unemployment, u*
Part of the total unemployment rate that is attributable to frictional and structural unemployment; equivalently, the unemployment rate that prevails when cyclical unemployment is zero, so that the economy has neither a recessionary nor an expansionary output gap
New cards
31
Okun's law
Each extra percentage point of cyclical unemployment is associated with about a
2 percent widening of a negative output gap, measured in relation to potential output
New cards

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