UNIT 14: THE BUSINESS CYCLE

business cycle model

a model showing the increases and decreasess in a nation's real GDP overtime, demonstrates an increase in real GDP over the long run, combined with short-run fluctuations in output

expansion

the phase of BC during which output is increasing

recession

the phase of BC during which output is falling

depression

a deep and prolonged recession

peak

"the turning point in the BC between an expansion and a contraction (suy thoái)

during a peak, output has stopped increasing and begins to decrease"

trough

"the turning point in the BC between a recession and an expansion

during a trough, output had been falling bottoms out (chạm mức thấp nhất) and begins to increase again"

recovery

"when GDP begins to increase following a contraction and a trough

GDP returns to its long-run potential level"

potential output

the level of output an ecno can achieve when it is producing at full employment ---> natural rate of unemployment, no more and no less

growth trend

the straight line in BCModel, which is usually upward-slopping and shows the long-run pattern of change in real GDP over time

positive output gap

the difference betw actual output and potential output when an ecno is producing more than full employment output --> rate of unemployment is less than natural rate --> econo is operating outside of its PPC

negative ouput gap

the difference betw actual output and potential output when an ecno is producing less than full employment output --> rate of unemployment is greater than natural rate --> econo is operating insides its PPC

balance of payments

the difference betw the funds a country receives and those it pays for all international transactions

demand

the willingness and ability of consumers to purchase goods and services

supply

the willingness and ability of businesses to offer goods and services for sale

save

to put money aside to spend in the future

gross domestic product (GDP)

the total market value of all the goods and services produced in a country during a given period

expectations

beliefs about what will happen in the future

downturn

a decline in economic activity

upturn

an increase in economic activity

consumption

purchasing and using goods/ser

equilibirum

a state of balance (eg, supply is the same as demand)

deficit

an amount of money that is smaller than is needed

surplus

an excess: a quantity that is larger than is needed

fiscal policy

goverment actuons concerning taxation and public expenditure

monetary policy

goverment or central bank actions concerning the rate of growing of the money in circulation

money supply

the total amoung of money available in an econo at a particular time

keynesianism

the economic theory that government monetary and fiscal policy should stimulate business acti and inre empl in a recession