econ exam 2 pt 2

inflation

An increase in the general (average) price level of goods and services in the economy.

deflation

A decrease in the general (average) price level of goods and services in the economy.

CPI

An index that measures changes in the average prices of consumer goods and services.

nominal income

the actual number of dollars received over a period of time.

real income

The actual number of dollars received (nominal income) adjusted for changes in the CPI.

business cycle

Alternating periods of economic expansion and contraction, which can be measured by changes in real GDP.

trough

The phase of the business cycle in which real GDP reaches its minimum after falling during a recession.

Coincident indicators

Variables that change at the same time real GDP changes.

Frictional unemployment

Temporary unemployment caused by the time required of workers to move from one job to another.

Structural unemployment

Unemployment caused by a mismatch of the skills of workers out of work and the skills required for existing job opportunities.

Cyclical unemployment

Unemployment caused by the lack of jobs during a recession.