Chapter 21 - Short-term economic fluctuations

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31 Terms

1
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Peak

: beginning of a recession; the high point of economic activity prior to a downturn.

2
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Depression

: particularly severe or protracted recession.

3
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Business cycles

: short- term fluctuations in GDP and other variables.

4
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Expansion

: period in which the economy is growing at a rate significantly above normal.

5
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Recession

= contraction: period in which the economy is growing at a rate significantly below normal.

6
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Business cycles

short-term fluctuations in GDP and other variables

7
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Recession = contraction

period in which the economy is growing at a rate significantly below normal

8
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Depression

particularly severe or protracted recession

9
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Peak

beginning of a recession; the high point of economic activity prior to a downturn

10
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Trough

end of a recession; the low point of economic activity prior to a recovery

11
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Expansion

period in which the economy is growing at a rate significantly above normal

12
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Boom

particularly strong and protracted expansion

13
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Potential output, Y* (or potential GDP or full employment output)

maximum sustainable amount of output (real GDP) that an economy can produce

14
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Output gap

difference between the economy's actual output and its potential output, relative to potential output, at a point in time

15
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Recessionary gap

negative output gap, which occurs when potential output exceeds actual output (Y < Y*)

16
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Expansionary gap

positive output gap, which occurs when actual output is higher than potential output (Y > Y*)

17
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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

18
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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

19
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Business cycles

Short-term fluctuations in GDP and other variables

20
New cards

Recession = contraction

Period in which the economy is growing at a rate significantly below normal

21
New cards

Depression

Particularly severe or protracted recession

22
New cards

Peak

Beginning of a recession; the high point of economic activity prior to a downturn

23
New cards

Trough

End of a recession; the low point of economic activity prior to a recovery

24
New cards

Expansion

Period in which the economy is growing at a rate significantly above normal

25
New cards

Boom

Particularly strong and protracted expansion

26
New cards

Potential output, Y* (or potential GDP or full employment output)

Maximum sustainable amount of output (real GDP) that an economy can produce

27
New cards

Output gap

Difference between the economy's actual output and its potential output, relative to potential output, at a point in time

28
New cards

Recessionary gap

Negative output gap, which occurs when potential output exceeds actual output (Y < Y*)

29
New cards

Expansionary gap

Positive output gap, which occurs when actual output is higher than potential output (Y > Y*)

30
New cards

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

31
New cards

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