Key Terms – Chapter 7 Unemployment – The number of people 16 or older who are willing and able to work, actively looking for a job, but cannot find one. Labor Force – The total number of employed and unemployed people actively seeking work. Frictional Unemployment – Temporary unemployment while workers search for a new job. Structural Unemployment – Long-term unemployment caused by a mismatch between workers’ skills and available jobs. Cyclical Unemployment – Unemployment caused by a recession or downturn in the economy. Inflation – A sustained increase in the overall price level of goods and services. Deflation – A sustained decrease in the overall price level of goods and services. Purchasing Power – The value of money in terms of what it can buy. Price Index – A measure that compares the cost of a market basket today to the cost in a base year. Consumer Price Index (CPI) – A measure of the average prices paid by consumers for goods and services. Real Rate of Interest – The nominal interest rate minus the inflation rate. Nominal Rate of Interest – The stated interest rate not adjusted for inflation. Recession – A period when economic activity declines for a sustained time. Depression – An extremely severe and prolonged recession. 7 Unemployment – The number of people 16 or older who are willing and able to work, actively looking for a job, but cannot find one. Labor Force – The total number of employed and unemployed people actively seeking work. Frictional Unemployment – Temporary unemployment while workers search for a new job. Structural Unemployment – Long-term unemployment caused by a mismatch between workers’ skills and available jobs. Cyclical Unemployment – Unemployment caused by a recession or downturn in the economy. Inflation – A sustained increase in the overall price level of goods and services. Deflation – A sustained decrease in the overall price level of goods and services. Purchasing Power – The value of money in terms of what it can buy. Price Index – A measure that compares the cost of a market basket today to the cost in a base year. Consumer Price Index (CPI) – A measure of the average prices paid by consumers for goods and services. Real Rate of Interest – The nominal interest rate minus the inflation rate. Nominal Rate of Interest – The stated interest rate not adjusted for inflation. Recession – A period when economic activity declines for a sustained time. Depression – An extremely severe and prolonged recession

Unemployment

The number of people 16 or older who are willing and able to work, actively looking for a job, but cannot find one.

Labor Force

The total number of employed and unemployed people actively seeking work.

Frictional Unemployment

Temporary unemployment while workers search for a new job.

Structural Unemployment

Long-term unemployment caused by a mismatch between workers’ skills and available jobs.

Cyclical Unemployment

Unemployment caused by a recession or downturn in the economy.

Inflation

A sustained increase in the overall price level of goods and services.

Deflation

A sustained decrease in the overall price level of goods and services.

Purchasing Power

The value of money in terms of what it can buy.

Price Index

A measure that compares the cost of a market basket today to the cost in a base year.

Consumer Price Index (CPI)

A measure of the average prices paid by consumers for goods and services.

Real Rate of Interest

The nominal interest rate minus the inflation rate.

Nominal Rate of Interest

The stated interest rate not adjusted for inflation.

Recession

A period when economic activity declines for a sustained time.

Depression

An extremely severe and prolonged recession.