Business Cycles, Unemployment, & Inflation

A set of flashcards covering key topics from the lecture on Business Cycles, Unemployment, and Inflation.

Malthusian Principle

The theory that population growth will outstrip the growth of food supply, leading to widespread famine and societal issues.

Great Divergence

A period marked by significant economic growth in some countries, particularly after the Industrial Revolution, compared to stagnation in others.

GDP (Gross Domestic Product)

The total value of all goods and services produced within a country's borders in a specific time period.

Expansion

A phase of the business cycle characterized by increasing economic activity and growth.

Contraction

A phase of the business cycle where economic activity decreases and the economy shrinks.

Recession

Defined as two consecutive quarters of negative GDP growth.

Bear Market

A market condition where stock prices fall by 20% or more from their peak.

Potential GDP Curve

Represents the maximum output an economy can produce without triggering inflation.

Economic Shocks

Unexpected events that significantly affect the economy, which can be financial, political, technological, or social.

Frictional Unemployment

Short-term unemployment occurring when people are between jobs or entering the labor force.

Structural Unemployment

Long-term unemployment resulting from a mismatch between skills and job requirements.

Cyclical Unemployment

Unemployment correlated with the business cycle, occurring during downturns.

Cost of Living Adjustment (COLA)

An increase in wages or benefits to keep pace with inflation.

Consumer Price Index (CPI)

A measure of the average change in prices over time that consumers pay for a basket of goods and services.

Hyperinflation

Extremely high and typically accelerating inflation, often exceeding 50% per month.

Demand Pull Inflation

Inflation that occurs when demand for goods and services exceeds their supply.

Cost Push Inflation

Inflation caused by rising production costs, leading to decreased supply.

Economies of Scale

Cost advantages that businesses gain due to a scale of operation, with cost per unit of output generally decreasing with increasing scale.

Diseconomies of Scale

Increased per unit costs that occur when a company grows beyond an optimal size.

Leakages from Circular Economy

Factors like savings, taxes, and imports that reduce the flow of money in the economy.

Injects into the Economy

Money added to the economy through private investments, government spending, and exports.

Rule of 70

A method to estimate the number of years required to double the value of an investment at a fixed annual rate of return.