Chapter 13: Economic Instability PDF

Chapter 13: Economic Instability Vocabulary 1. Business Cycles-Regular patterns of economic expansion and contraction over time. 2. Business Fluctuations-Variations in economic activity over time, such as changes in GDP, employment, and production. 3. Rec...

Chapter 13: Economic Instability Vocabulary 1. Business Cycles-Regular patterns of economic expansion and contraction over time. 2. Business Fluctuations-Variations in economic activity over time, such as changes in GDP, employment, and production. 3. Recession-A significant decline in economic activity, typically defined as two consecutive quarters of negative GDP growth. 4. Peak-The highest point in the business cycle, indicating maximum economic output before a downturn. 5. Through-The lowest point in the business cycle, signaling the end of a recession and the start of recovery. 6. Expansion-The phase of the business cycle where economic activity is increasing, leading to growth in GDP, employment, and production. 7. Trend Line-A line that shows the general direction in which a business cycle is moving over time. 8. Depression-A prolonged and severe downturn in economic activity, much worse than a recession. 9. Depression Scrip-Substitute currency issued by local governments or organizations during economic depressions when the official currency is scarce. 10. Leading Economic Indicator-Economic metrics that predict future movements in the economy, like new orders for goods or stock market performance. 11. Dow Jones Industrial Average (DJIA)-A stock market index that tracks the performance of 30 major companies in the U.S. 12. Leading Economic Index (LEI)-A composite index of leading economic indicators designed to forecast future economic activity. 13. Econometric Model-A statistical model used to describe economic processes and forecast future trends using mathematical equations. 14. Inflation-The general rise in prices over time, decreasing the purchasing power of money. 15. Deflation-A decrease in the general price level of goods and services, increasing the value of money. 16. Price Index-A measurement that examines the average change in prices over time for a specific basket of goods and services. 17. Consumer Price Index (CPI)-A key price index that tracks changes in the cost of a fixed basket of consumer goods and services. 18. Market Basket-The set of goods and services tracked in a price index, like the CPI. 19. Base Year-A reference year used in economic measurements to compare price levels or other data across time. 20. Creeping Inflation-A low, steady rate of inflation over time, typically less than 3% per year. 21. Hyperinflation-Extremely rapid inflation, where prices rise uncontrollably, often exceeding 50% per month. 22. Stagflation-A situation in which inflation and unemployment rise simultaneously, typically during a period of stagnant economic growth. 23. Producer Price Index (PPI)-A price index that measures the average change in selling prices received by producers for their output. 24. Implicit GDP Price Deflator-A measure of the price changes in goods and services included in GDP, accounting for inflation and deflation. 25. Demand-pull Inflation-Inflation caused by an increase in demand for goods and services, outpacing supply. 26. Cost-push Inflation-Inflation driven by rising costs of production, which cause producers to increase prices. 27. Creditors-Individuals or institutions to whom money is owed. 28. Debtors-Individuals or institutions that owe money. 29. Civilian Labor Force-The total number of people aged 16 and over who are either working or actively looking for work, excluding military personnel. 30. Unemployed-Individuals who are actively seeking work but are unable to find employment. 31. Unemployment Rate-The percentage of the labor force that is unemployed and actively seeking work. 32. Long-term Unemployment-Unemployment that lasts for an extended period, typically over 27 weeks. 33. Frictional Unemployment-Short-term unemployment that occurs when people are between jobs or are entering the workforce for the first time. 34. Structural Unemployment-Unemployment caused by changes in the economy, such as technological advancements or shifts in demand, which make certain skills obsolete. 35. Outsourcing-The practice of hiring external firms or workers, often from other countries, to perform tasks previously done internally. 36. Technological Unemployment-Job loss due to advancements in technology that reduce the need for human labor. 37. Cyclical Unemployment-Unemployment that rises during economic downturns and falls during periods of growth. 38. Seasonal Unemployment-Unemployment that occurs at certain times of the year when demand for labor in certain industries is low (e.g., farming, tourism). 39. GDP gap-The difference between actual GDP and potential GDP, showing the loss of economic output due to unemployment or underutilized resources. 40. Misery Index-An economic indicator that adds the unemployment rate to the inflation rate, indicating how the average citizen is faring economically. Chapter Assessment 1. Describe the business cycle and explain what causes changes in it. 2. What post-Depression reforms kept the economy from reaching Depression-level lows during the Great Recession of 2008–2009? Give two examples. 3. What are the differences among creeping inflation, hyperinflation, and stagflation? 4. How does inflation affect consumers? 5. How does education affect employment? 6. What makes structural and technological unemployment more serious than frictional unemployment?