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Expansion

the economy experiences relatively rapid growth, interest rates tend to be low, and production increases

Peak

when growth hits its maximum rate. Prices and economic indicators may stabilize for a short period before reversing to the downside.

Recession

growth slows, employment falls, and prices stagnate. As demand decreases, businesses may not immediately adjust production levels, leading to oversaturated markets with surplus supply and a downward movement in prices

Trough

reached when the economy hits a low point, with supply and demand hitting bottom before recovery. The low point in the cycle represents a painful moment for the economy, with a widespread negative impact from stagnating spending and income

GDP

The measure of aggregate output; the attempt to calculate how many good and services we are able to produce in a specific area and time frame

C + I + G + Nx

Nominal GDP

Uses prevailing price

Not including inflation

Real GDP

measures the value of final goods and services produced within the borders of a country, corrected for price changes

Unemployment

Refers to individuals who are 16 years or older, actively seeking work, not disabled, and not in a mental institution.

Labor Force

The sum of the unemployed and employed individuals.

Labor Force Participation Rate

The percentage of the population either working or actively looking for work, calculated as (Labor Force ÷ Civilian Noninstitutional Population) x 100.

Types of Unemployment

Includes seasonal, cyclical, frictional, and structural unemployment, each arising from different economic conditions or changes in the job market.

Seasonal

Business shuts down during certain seasons

Cyclical

Follows the business cycle 

Demand goes up, more people required to make it

Frictional

When you leave a bad job for a better job 

Most favorable -- creates a PPF curve that is minorly inside of the curve 

Structural

Overall structural change in the economy changes the jobs that are needed

Discouraged Workers

people who don’t look for jobs (ex: covid)

Inflation (Demand Pull / Cost Push)

Inflation can result from excessive spending relative to output (demand-pull) or rising per-unit input costs (cost-push), impacting purchasing power and real income.

Purchasing power

How much does my dollar buy me?

Price Indexes

Measures like the Consumer Price Index (CPI) and Chapwood Index track changes in the cost of a basket of goods over time, reflecting inflation and consumer preferences.

Sticky Prices

Refers to prices that do not change easily, such as menu prices, due to the cost of adjusting them outweighing the benefits.

Supply & Demand Shocks

Unexpected events altering supply or demand levels, leading to changes in prices and real output, impacting economic stability.

PPF Curve

Illustrates the trade-off between producing two goods efficiently, affected by GDP growth and unemployment rates, assuming resources are used optimally.

BLS / BEA

Bureau of Labor Statistics collects unemployment data, while the Bureau of Economic Analysis analyzes economic data, aiding in economic policy decisions.

Crowding-Out Effect

Increased government borrowing and spending can reduce private sector spending, affecting the overall economy.

Doubling GDP

Divide 70 by the annual growth rate

Free Trade

encourages growth by promoting the rapid spread of new inventions and innovations

Full Employment

natural rate of unemployment (~4-6% unemployment)

Intermediate Goods

Bought in the process of making a product to sell

Final Goods

Ignoring intermediate goods, just counting the value that is added

Excluding: public transport, private transfer payments, stock/bond market transactions, intermediate goods, second hand sales, domestic firms producing/selling abroad

Saving

Future consumption

Present consumption lowers

Investment

Future production

Present production lowers