Lecture on Business Cycles, Unemployment, and Inflation

These flashcards cover key concepts and definitions related to business cycles, unemployment, inflation, and economic growth, aiding in exam preparation.

What principle suggested that population growth would lead to widespread death and tyranny?

The Malthusian Principle.

How is a recession defined?

Two consecutive quarters of negative GDP growth.

What is considered a bear market in stocks?

A drop of 20% from its peak.

What was a key lesson learned by the Federal Reserve from the Great Financial Crisis?

Not to be timid about spending.

What defines capital goods, and how long do they typically last?

Capital goods are used to make other goods and usually last for decades.

What are nondurable consumer goods?

Goods that last less than a year, such as food, clothing, and medical services.

What is the definition of structural unemployment?

Unemployment due to a mismatch between jobs and skills.

What is Okun’s Law?

Okun's Law describes the relationship between unemployment and economic growth.

What is the Consumer Price Index (CPI) used for?

To measure inflation through a representative basket of consumer goods.

What causes hyperinflation?

Inflation of at least 50% per month, often due to monetary phenomena.

What differentiates demand-pull inflation from cost-push inflation?

Demand-pull inflation is caused by rising consumer demand, while cost-push inflation is caused by rising costs.

What is the equation for GDP?

GDP = C + I + G + (X - M).

What are the two ways to calculate GDP?

The Expenditure Approach and the Income Approach.

What is the rule of 70?

The number of years to double an investment equates to 70 divided by the annual growth rate.

What are the four components included in GDP?

Consumption, Gross private investment, Government spending, Net exports.

What is the impact on GDP if the government operates with a surplus?

Growth slows because not all taxes are reinvested back into the economy.