Economics Chapter 8

  1. (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
    economic growth
  2. 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
    rule of 70
  3. 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
  4. Recurring increases and decreases in the level of economic activity over period of years; consists of peak, recession, trough, and recovery phases
    business cycle
  5. 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.
  6. A period of declining real GDP, accompanied by lower real income and higher unemployment
  7. Where the output and employment "bottom out" at their lowest levels. This phase may be either short-lived or quite long.
  8. 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.
  9. Person 16 years of age and older who are not in institutions and who are employed or are unemployed (and seeking work).
    labor force
  10. The percentage of the labor force unemployed at any time
    unemployment rate
  11. Employees who have left the labor force because they have not been able to find employment
    discouraged workers
  12. A type of unemployment caused by workers voluntarily changing jobs and by temporary layoffs ; unemployed workers between jobs.
    frictional unemployment
  13. 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
    structural unemployment
  14. A type of unemployment cause by insufficient total spending (or by insufficient aggregate demand).
    cyclical unemployment
  15. 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.
    full-employment rate of unemployment
  16. 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
    natural rate of unemployment (NRU)
  17. The real output (GDP) an economy can produce when it fully employs its available resources.
    potential output
  18. The amount by which actual gross domestic product falls below potential output
    GDP gap
  19. 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
    Okun's law
  20. A rise in the general level of prices in an economy
  21. 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.
    demand-pull inflation
  22. 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
    cost-push inflation
  23. The average production cost of a particular level of output; total input cost divided by units of output
    per-unit production costs
  24. The number of dollars received by an individual or group for its resources during some period of time
    nominal income
  25. The amount of goods and services that can be purchased with nominal income during some period of time; nominal income adjusted for inflation
    real income
  26. Increases in the price level (inflation) that occur at the expected rate
    anticipated inflation
  27. Increases in the price level (inflation) at a rate greater than expected.
    unanticipated inflation
  28. An automatic increase in the incomes (wages) or workers when inflation occurs; guaranteed by a collective bargaining conract between firms and workers.
    cost-of-living adjustments (COLAs)
  29. 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
    real interest rate
  30. The interest rate expressed in terms of annual amounts currently charged for interest and not adjusted for inflation
    nominal interest rate
  31. A decline in the economy's price level.
  32. A very rapid rise in the price level; an extremely high rate of inflation
Card Set
Economics Chapter 8