Lecture 5: Macroeconomic Fluctuations Flashcards

Vocabulary terms and definitions related to macroeconomic fluctuations, business cycles, and labor market equilibrium based on the Lecture 5 transcript.

Economic fluctuations (or "business cycles")

Short-run variation in the growth of GDP, typically examined by comparing the path of real GDP to a trend line.

Recessions

In high-income economies, these are episodes of negative economic growth characterized as the period between a peak of economic activity and its subsequent trough.

Expansion

The period between recessions characterized by sustained economic growth.

Real interest rate ($r$)

The interest rate adjusted for inflation, calculated as the nominal interest rate ($i$) minus the inflation rate ($\pi$), or r = i - ext{̀}π.

Disposable income

The amount of income remaining after taxes have been paid, expressed in function notation as $Y - T$.

Unemployment

The gap between the quantity of labor supplied and the quantity of labor demanded at the market wage, often caused by downward rigid wages during a recession.

Multipliers

Economic mechanisms that amplify the effects of any economic shock, regardless of its source, and exacerbate the resulting downturn.