Understanding Economic Concepts: Business Cycle and Growth

Flashcards covering key economic concepts related to business cycles and growth.

Trough

The lowest point in a business cycle, indicating the end of a recession and the beginning of an expansion.

Peak

The highest point in a business cycle, where economic activity is at its maximum before a downturn.

Recession

A period of economic decline characterized by a decrease in GDP, along with reduced consumer spending and increased unemployment.

Expansion (Boom)

A phase in the business cycle where the economy grows, GDP increases, and employment rises.

Long-term trend

The overall direction in which an economy's performance is heading over an extended period, typically showing gradual growth.

Business cycle oscillation

The fluctuations between periods of economic growth and contraction that do not follow a predictable pattern.

Longer-lasting phases

Generally, expansions last longer than recessions, which affects the overall long-run growth trend.

Depression

An extended period of economic decline that is more severe than a recession.

GDP Growth (1865-2010)

The long-run change in the U.S. GDP shows a general upward trend over time.

Great Depression

A severe worldwide economic depression that took place in the 1930s, characterized by drastic declines in income and employment.

Extensive Growth

Economic growth achieved by increasing the quantity of resources or labor, rather than improving productivity.

Intensive Growth

Economic growth that results from improvements in productivity and efficiency.

Rising incomes

Only intensive growth consistently leads to increases in real incomes across the population.

Growing real GDP with falling real income

Yes, it is possible if the economy grows but the benefits do not reach all segments of the population.

Technology and capital

Advancements in technology and increased capital investments contribute significantly to economic growth.

Vicious-cycle-of-poverty hypothesis

The idea that poor countries remain poor due to a cycle of low income leading to low savings and investment.

Capital flight

The large-scale exit of financial assets or capital from a country, often due to economic instability.

Brain drain

The emigration of highly trained or qualified people from one country to another, which can hinder growth in the home country.

Government Failure

A situation where government intervention fails to improve economic performance, contributing to low growth rates.

Rule-of-law

The principle that law should govern a nation, ensuring fairness and stability; its absence can damage growth.

Expropriation

The act of a government taking privately owned property for public use, often without fair compensation, impacting growth negatively.

Crony Capitalists

Individuals or businesses that benefit from preferential treatment from the government, which can stifle competition and hinder economic growth.