EKN 234 Chapter 9: The Short Run

Flashcards covering key vocabulary from the lecture notes on the short run economic model, trends, fluctuations, and related concepts.

Short Run

A period in which the price of at least one factor of production cannot change.

Endogenous Production

The present levels of output and inflation.

Exogenous

Having an external cause or origin.

Potential Output

Maximum amount of goods and services an economy can turn out when it is most efficient, at full capacity. Referred to as the production capacity of the economy.

Short-run output

The difference in actual and potential output, expressed as a % of potential output.

Recession

Initiates when actual output drops below potential output, leading to negative short run output, downward trend in GDP, marked by reduced production and employment levels.

Phillips Curve

Shows The relationship between change in inflation and short run output.

Okun’s Law

Shows the relationship between short run output, unemployment, and short run fluctuations. Provides a rule of thumb that helps explain how changes in economic output (GDP) relate to changes in unemployment

Natural Rate of Unemployment

The rate of unemployment that exists in the long run.

Cyclical Unemployment

Unemployment fluctuations in the short run. How the actual unemployment deviates from potential unemployment - determined by changes in the short run output.