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
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21
Depression
Particularly severe or protracted recession
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22
Peak
Beginning of a recession; the high point of economic activity prior to a downturn
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23
Trough
End of a recession; the low point of economic activity prior to a recovery
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24
Expansion
Period in which the economy is growing at a rate significantly above normal
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25
Boom
Particularly strong and protracted expansion
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26
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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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*)
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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
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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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