Economics Chapter 8

(1) An outward shift in the production possibilities curve that results from an increase in resource supplies or quality or an improvement in technology; (2) an increase of real output (gross domestic product) or real output per capita

A method for determining the number of years it will take for some measure to double, given its annual percentage increase. Example: To determine the number of years it will take for the price level to double, divide 70 by the annual rate of inflation

A measure of average output or real output per unit of input. For example, the productivity of labor is determined by dividing real output by hours of work

Recurring increases and decreases in the level of economic activity over period of years; consists of peak, recession, trough, and recovery phases

point where business activity has reached a temporary maximum. The economy is at full employment and the level of real output is at or very close to the economy's capacity. The price level is likely to rise during this phase.

A period of declining real GDP, accompanied by lower real income and higher unemployment

Where the output and employment "bottom out" at their lowest levels. This phase may be either short-lived or quite long.

Expansion phase, where the output and employment rise toward full employment. As recovery intensifies, the price level may begin to rise before full employment and full-capacity production return.

Person 16 years of age and older who are not in institutions and who are employed or are unemployed (and seeking work).

The percentage of the labor force unemployed at any time

Employees who have left the labor force because they have not been able to find employment

A type of unemployment caused by workers voluntarily changing jobs and by temporary layoffs ; unemployed workers between jobs.

Unemployment of workers whose skills are not demanded by employers, who lack sufficient skill to obtain employment, or who cannot easily move to locations where jobs are available

A type of unemployment cause by insufficient total spending (or by insufficient aggregate demand).

The unemployment rate at which there is no cyclical unemployment of the labor force; equal to between 4 and 5 percent in the United States because some frictional and structural unemployment is unavoidable.

The full employment unemployment rate; the unemployment rate occurring when there is no cyclical unemployment and the economy is achieving its potential output; the unemployment rate at which actual inflation equals expected inflation

The real output (GDP) an economy can produce when it fully employs its available resources.

The amount by which actual gross domestic product falls below potential output

The generalization that any 1-percentage-point rise in the unemployment rate above the full employment unemployment rate will increase the GDP gap by 2 percent of the potential output (GDP) of the economy

A rise in the general level of prices in an economy

Increases in the price level (inflation) resulting from an excess of demand over output at the existing price level, caused by an increase in aggregate demand.

Increases in the price level (inflation) resulting from an increase in resource costs (for example, raw-material prices) and hence in per-unit production costs; inflation cause by reductions in aggregate supply

The average production cost of a particular level of output; total input cost divided by units of output

The number of dollars received by an individual or group for its resources during some period of time

The amount of goods and services that can be purchased with nominal income during some period of time; nominal income adjusted for inflation

Increases in the price level (inflation) that occur at the expected rate

Increases in the price level (inflation) at a rate greater than expected.

An automatic increase in the incomes (wages) or workers when inflation occurs; guaranteed by a collective bargaining conract between firms and workers.

The interest rate expressed in dollars f constant value (adjusted for inflation) and equal to the nominal interest rate less the expected rate of inflation

The interest rate expressed in terms of annual amounts currently charged for interest and not adjusted for inflation

A decline in the economy's price level.

A very rapid rise in the price level; an extremely high rate of inflation