principles of macroeconomics chapter 6
business cycle
Recurring increases and decreases in the level of economic activity over periods of years; consists of peak, recession, trough, and expansion phases.
real (GDP)
Gross domestic product adjusted for inflation; gross domestic product in a year divided by the GDP price index for that year, the index expressed as a decimal.
nominal GDP
GDP measured in terms of the price level at the time of measurement; GDP not adjusted for inflation.
unemployment
The failure to use all available economic resources to produce desired goods and services; the failure of the economy to fully employ its labor force.
inflation
A rise in the general level of prices in an economy; an increase in an economy’s price level.
modern economic growth
The historically recent phenomenon in which nations for the first time have experienced sustained increases in real GDP per capita.
saving
Disposable income not spent for consumer goods; equal to disposable income minus personal consumption expenditures; saving is a flow
investment
In economics, spending for the production and accumulation of capital and additions to inventorie
expectations
The anticipations of consumers, firms, and others about future economic conditions.
shocks
Sudden, unexpected changes in demand (or aggregate demand) or supply (or aggregate supply).
demand shocks
Sudden, unexpected changes in demand.
supply shocks
Sudden, unexpected changes in aggregate supply.
positive demand shock
when the demand turns out to be higher than expected
negative demand shock
when the demand turns out to be lower than expected
inflexible prices/ sticky prices
Product prices that remain in place (at least for a while) even though supply or demand has changed; stuck prices or sticky prices.
flexible prices
Product prices that freely move upward or downward when product demand or supply changes.
inventories
goods that have been produced but remain unsold