Macroeconomics: Chapter 26

alternating rises and declines in the level of economic activity, sometime over several years.

when business activity has reached a temporary maximum.

is a period of decline in total output, income, and employment.

output and employment "bottom out" at their lowest levels.

a period in which real GDP, income, and employment rise.

is the sum of all employed and unemployed adults.

is the percentage of the labor force unemployed.

have usually given up on searching for a job because they found no suitable employment.

is caused by those transitioning between jobs or looking for a first job.

is joblessness caused not by lack of demand, but by changes in demand patterns or obsolescence of technology,

occurs when the unemployment rate moves in the opposite direction as the GDP growth rate.

is currently between 4.5 and 5.0 because of frictional and structural unemployment.

The level of unemployment characterizing the economy in long-run equilibrium, determined by the levels of frictional, structural, and institutionally induced unemployment. At this rate of unemployment, inflation should be constant, so it is sometimes called the nonaccelerating inflation rate of unemployment, or NAIRU.

refers to the highest level of real Gross Domestic Product output that can be sustained over the long term.

represents workers who want to work but can't find a job, businesses who are reluctant to hire new employees, land being put to sub-optimal use, and banks and credit institutions who accumulate money instead of lending it out.

The relationship between an economy's unemployment rate and its gross national product (GNP).

is a rise in the general level of prices of goods and services in an economy over a period of time.

is a decrease in the general price level of goods and services.

is a time series measure of the price level of consumer goods and services.

Price increases which result from an excess of demand over supply.

A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.

is the cost you would physically spend to manufacture a item.

reports price changes without volatile food and energy prices.

Regular income that has not yet been adjusted down to correspond with decreasing purchasing power or up to correspond with inflation.

Income of an individual, organization, or country, after taking into consideration the effects of inflation on purchasing power.

Creditors lose and debtors gain if the lender does not anticipate inflation correctly.

If the inflation rate corresponds to what the majority of people are expecting.

contract provisions that tie wages to changes in the cost of living.

is the rate of interest an investor expects to receive after allowing for inflation.

The interest rate unadjusted for inflation.

inflation growing at a very high rate in a very short time.

a business cycle.

Employment and output reach their lowest levels.

GDP that lasts six months or longer.

6 months to 18 months.

The production of nondurable consumer goods is more stable than the produciton of durable consumer goods over the business cycle.

Services.

8 percent.

Counted as employed full-time because they are receiving payment for work.

Understate the amount of unemployment because of the presence of "discouraged" workers who are not actively seeking employment.

Structural.

Is in the process of voluntarily switching jobs.

Cyclical

Is equal to the total of fricitonal and structural unemployment

occurs when total spending exceeds the economy's ability to provide output at the existing price level.

$480 billion in potential output.

Every 1 percent that the actual unemployment rate exceeds the natural unemployment rate, a 2 percent GDP gap is generated.

arbitrarily redistributes real income and wealth.

3.4%

7 percent.

The Consumer Price Index

"Too much money chasing too few goods"

Cost-push inflation.

a negative supply shock.

high European unemployment rates have resulted from government policies and union contracts that increase the costs of hiring and reduce the individual's opportunity cost of being unemployed.

causing a severe negative wealth effect and engendering pessimism about the economy's future.