Economics Chapter 2 Study Guide

Questions and Answers

What is prosperity?

A period of increasing unemployment

A period with high job availability and good wages (correct)

A phase of budget deficit

A time of economic recession

What can increase productivity?

Improvement in management techniques.

Deflation leads to an increase in people's ability to buy products.

False

What is a budget deficit?

A situation where a government spends more money than it takes in. Signup and view all the answers

Describe a recession.

A period characterized by rising unemployment, decreasing demand, and lowered production. Signup and view all the answers

What is inflation?

An increase in prices and a decrease in the buying power of the dollar. Signup and view all the answers

What does interest represent?

The cost of money. Signup and view all the answers

What does recovery indicate in economic terms?

An increase in employment, demand for goods, and the GDP. Signup and view all the answers

What is the business cycle?

Movement of the economy from one condition to another. Signup and view all the answers

What does stock represent?

Ownership in a corporation. Signup and view all the answers

What does GDP stand for?

Gross Domestic Product. Signup and view all the answers

What are retail sales?

The total dollar value of all final goods and services produced each year in a company. Signup and view all the answers

What does CPI stand for?

Consumer Price Index. Signup and view all the answers

What is the unemployment rate?

The percentage of people in the labor force who are looking for work but are unable to find work. Signup and view all the answers

Study Notes

Economic Indicators

Prosperity: Characterized by high employment levels, good wages, record production rates by businesses, and increasing GDP.
Productivity: Enhanced through effective management techniques leading to improved output.
Deflation: Prices decline, but consumers have less financial capacity to purchase goods.
Budget Deficit: Occurs when government expenditures surpass revenues within a specific timeframe.

Economic Cycles

Recession: A downturn marked by rising unemployment, decreasing demand, and reduced business production.
Recovery: A phase of economic improvement characterized by rising employment, increased demand for goods, and growing GDP.
Business Cycle: Illustrates the fluctuations in the economy, transitioning between growth and contraction phases.

Financial Concepts

Inflation: A rise in prices leading to diminished purchasing power of currency.
Interest: Represents the cost associated with borrowing money, influencing economic activities.

Economic Measurements

GDP (Gross Domestic Product): Reflects the overall economic activity by comparing the prices of a fixed selection of items across different years.
Retail Sales: Measures the total dollar value of final goods and services produced annually by a company, indicating consumer spending trends.
CPI (Consumer Price Index): The primary metric for assessing national output and monitoring inflation.

Labor Market Indicators

Unemployment Rate: Represents the portion of the labor force actively searching for jobs but unable to secure employment, serving as a key indicator of economic health.
Stock: Denotes ownership stakes in corporations, indicating investment value and market conditions.

Description

This study guide covers key terms related to economic activity, including prosperity, productivity, and deflation. Use the flashcards to enhance your understanding of these concepts and their implications within the economy.