Circular Flow Model
The two main participants in a simple circular flow model?
Who are households and firms?
This term defines a period of economic growth characterized by increasing Real GDP.
What is expansion?
This type of GDP measures a country's economic output using current year prices.
What is nominal GDP?
Individuals who have stopped looking for work because they believe no jobs are available for them.
What are discouraged workers?
A persistent rise in the general price level of goods and services.
What is Inflation?
This market is where businesses buy inputs like labor and land from households
What is the factor (or resource) market?
This line represents the long-term, optimal economic growth rate with full employment.
What is the trend line?
To calculate this type of GDP, you multiply current year quantities by base-year prices.
What is Real GDP?
This type of unemployment occurs when workers' skills do not match those needed for available jobs.
What is structural unemployment?
The measurement tool used by the U.S. government to track price changes of a "basket" of goods.
What is the Consumer Price Index (CPI)?
This market is where households spend their income to purchase finished products
What is the product market?
The central bank might use this tool (lowering interest rates) to combat a trough.
What is monetary policy?
This is the formula for calculating Real GDP when given Nominal GDP and the GDP deflator.
What is (nominal GDP)/(GDP deflator) X100?
If a worker is laid off due to a decrease in aggregate demand, they are experiencing this type of unemployment.
What is cyclical unemployment?
A sustained drop in the general price level.
What is deflation?
This direction represents the flow of money in relation to the flow of goods and services
What is the opposite (or counterclockwise) direction
This term describes a period of "negative growth" where the economy is shrinking rather than expanding.
What is a Contraction?
In the designated "base year," this relationship exists between Nominal GDP and Real GDP.
What is they are equal?
These workers are not counted in the official unemployment rate, even though they may want a job
Who are discouraged workers or not in the labor force
The loss of this happens when income stays the same while prices go up.
What is purchasing power?
These represent the two main injections into the circular flow model, alongside investment and government spending
What are exports?
This graph shows the inverse relationship between the rate of unemployment and the rate of inflation in the short run.
What is the Phillips Curve?
This is the primary reason Real GDP is used instead of Nominal GDP when comparing output over time.
What is to remove the effects of inflation (or price changes)?
A worker who loses their job in the summer because their work is only needed in winter is experiencing this.
What is seasonal unemployment?
Type of inflation caused by consumers wanting more goods than companies can produce.
What is Demand-Pull Inflation?