Chapter 12 Business cycles and economic growth Part 1

Flashcards about Business cycles and economic growth

What is the business cycle?

Alternating periods of economic growth and contraction, measured by changes in real GDP, sales levels, and employment.

How predictable are economic fluctuations?

Irregular and unpredictable.

What is the relationship between macroeconomic variables during fluctuations?

Most macroeconomic variables fluctuate together.

Do macroeconomic variables fluctuate by the same amount?

They fluctuate by different amounts.

What is the relationship between real GDP and unemployment?

Changes in real GDP are inversely related to changes in the unemployment rate.

What is a recession?

A period of declining real incomes and rising unemployment (2 negative quarters of real GDP).

What is a trend?

Directional movement of the economy over an extended time, usually 20-30 years.

What are seasonal variations?

Recurring fluctuations in activity in a given period, usually 1 year.

What are random fluctuations?

Changes in activity caused by unexpected events.

What are cyclical fluctuations?

Changes in activity that occur regardless of trend, seasonal variations, or random forces.

What are major cycles?

Wide fluctuations, serious contractions or depressions, widespread unemployment, lower output, low profits or net losses.

What are the drivers of long cycles?

Steam, chemicals, electricity, cars, planes, computers, and the internet.

What is a peak?

Highest level of economic activity in a particular cycle.

What is a contraction?

Noticeable drop in the level of business activity.

What is a trough?

Lowest level of business activity in a particular cycle.

What is an expansion?

Rising level of economic activity.

At trough, what is the level of output

Low.

At trough, what is the level of pessimism

High.

At peak, what is the level of optimism

High.