Unit 3 : The Ups and Downs of the Economy

Business Cycle

The recurring pattern of expansion and contraction in the economy, characterized by increasing and decreasing economic activity and GDP growth.

Gross Domestic Product (GDP)

The total value of all goods and services produced within a country in a given period, serving as a measure of the country's economic performance.

Unemployment rate

The percentage of the labor force that is unemployed and actively seeking employment, indicating the level of joblessness in an economy.

Inflation

The general increase in prices of goods and services over time, leading to a decrease in the purchasing power of money.

The general increase in prices of goods and services over time, leading to a decrease in the purchasing power of money.

Expansionary (recovery)

A phase of the business cycle characterized by increasing economic activity and GDP growth, indicating a recovery from a previous contractionary phase.

Peak

The highest point of economic activity in a business cycle, representing the end of an expansionary phase and the beginning of a contractionary phase.

Contractionary (recession)

A phase of the business cycle characterized by decreasing economic activity and GDP contraction, leading to a decline in overall economic output.

Trough

The lowest point of economic activity in a business cycle, marking the end of a contractionary phase and the beginning of an expansionary phase.

Economic indicators

Statistics used to measure and analyze the performance of an economy. There are 3 we have considered in this class.

Frictional unemployment

Unemployment that occurs when people are transitioning between jobs or entering the workforce for the first time.

Structural unemployment

Unemployment that occurs due to a mismatch between the skills of workers and the available job opportunities, often caused by technological advancements or changes in the economy.

Cyclical unemployment

Unemployment that occurs as a result of the ups and downs of the business.

Unemployment that occurs as a result of the ups and downs of the business.

Demand-pull inflation

Inflation that occurs when demand exceeds the available supply of goods and services, leading to an increase in overall prices.

Costs of Inflation

Negative consequences of inflation, such as reduced purchasing power, uncertainty in the economy, and potential distortions in resource allocation.

Consumption spending

Spending by households on goods and services, reflecting the demand side of the economy and contributing to overall economic growth.

Investment spending

Spending by businesses on capital goods and equipment, aimed at increasing production capacity and stimulating economic growth.

Per Capita

Per person or per capita basis, often used to measure economic indicators on an individual level to account for population differences.