Chapter 5 (macro)

real gross domestic product (real GDP)

A measure of the value of all newly produced goods and services in a country during a specific period, adjusted for changes in prices over time.

economic growth

An upward trend in real GDP, reflecting an expansion in the economy over time.

economic fluctuations

Swings in the real GDP that cause the economy to deviate from its long-term trend.

business cycles

The ups and downs in GDP experienced by an economy, including phases such as peak, recession, trough, expansion, and recovery.

recession

A decline in economic activity that lasts for at least 6 months.

peak

The highest point in real GDP before a recession.

trough

The lowest point in real GDP at the end of a recession.

expansion

The period between the trough of the recession and the next peak, representing a general rise in output and employment.

recovery

The early part of an economic expansion that occurs immediately after a recession.

depression

A prolonged and deep recession; there is no formal definition.

unemployment rate

The percentage of the labor force that is unemployed.

labor force

Workers who are either working (employed) or looking for work (unemployed).

inflation rate

The percentage increase in the overall price level over a given period of time, usually one year.

disinflation

A decline in the inflation rate.

deflation

A negative inflation rate; occurs when the price level drops.

interest rate

The amount received per dollar loaned per year, usually expressed as a percentage of the total loan.

real interest rate

The interest rate minus the expected rate of inflation; it adjusts the nominal interest rate for inflation.

nominal interest rate

The interest rate uncorrected for inflation.

potential GDP

The long-term growth trend for real GDP within an economy, determined by the available supply of capital, labor, and technology.

aggregate demand

The total demand for goods and services by consumers, businesses, government, and foreigners.

supply-side policies

Economic policies that aim to increase long-term economic growth.

demand-side policies

Economic policies that aim to influence economic fluctuations by influencing aggregate demand.