Macroeconomics: Unit 29

Business Cycle

Alternating rises and declines in the level of economic activity, sometimes over several years.

Peak

A temporary maximum in the business cycle where the economy is near full employment and output is close to capacity.

Recession

A period of decline in total output, income, and employment lasting six months or more, marked by widespread contraction in business activity.

Trough

The lowest point of a recession or depression where output and unemployment bottom out.

Expansion

A recovery phase that follows a recession where output, income, and employment rise.

Business Fluctuations

A more modern term used to describe economic cycles, emphasizing irregularities rather than regular cycles.

Bureau of Labor Statistics (BLS)

The U.S. agency that conducts nationwide surveys to determine employment status among households.

Frictional Unemployment

Temporary unemployment occurring when people are between jobs or waiting to be re-hired.

Structural Unemployment

Unemployment resulting from the changing composition of jobs and skills in the economy.

Cyclical Unemployment

Unemployment caused by a decline in total spending and insufficient demand for goods and services.

Full Employment

A condition in which there is no cyclical unemployment, although some frictional and structural unemployment may exist.

GDP Gap

The difference between actual GDP and potential GDP, often used to illustrate the economic costs of unemployment.

Consumer Price Index (CPI)

A measure computed by the BLS that tracks changes in the price level of a basket of consumer goods and services.

Deflation

A rare decrease in the Consumer Price Index where a dollar can purchase more than it did the previous year.

Demand-pull Inflation

Inflation caused by an increase in demand and excessive money supply, leading to higher prices.

Cost-Push Inflation

Inflation that occurs due to increased costs of production, often driven by sudden increases in raw material prices.

Hyperinflation

Extremely rapid inflation that can destroy the value of currency and disrupt economic relationships.