The Business Cycle
The period of growth where the economy is steadily improving, marked by increasing GDP and a lower unemployment rate.
What is expansion?
This market basket strategy helps determine the inflation rate by comparing past year prices with current prices.
What is the Consumer Price Index or CPI?
The largest portion of the United States' GDP.
What is consumption?
The type of unemployment that results from new workers looking for their first job or people changing jobs.
What is frictional unemployment?
An item that is sold by the United States and bought by other countries.
BONUS: A foreign-made product that is bought by consumers or businesses in the US.
What is an export?
BONUS: Import.
The high point of expansion, when the economy starts to overheat.
BONUS: How can we tell the economy is starting to overheat?
What is a peak?
BONUS: High inflation and/or very low unemployment.
This is the stable inflation rate that the US aims for.
What is 1-3%?
This method of calculation is used to figure out the standard of living across multiple countries with different populations.
What is GDP per capita?
The type of unemployment that results from evolution in business and/or technology.
What is structural unemployment?
The trend of the world's economy and culture becoming steadily interconnected, made possible through free trade.
What is globalization?
The state of the economy after two successive quarters of contraction.
What is recession?
This type of inflation occurred during the Great Depression and resulted in very low demand.
What is deflation?
These types of goods, which are used in the production of another good, are not counted in GDP.
What are intermediate goods?
This is the natural rate of unemployment, what the Federal Reserve aims for.
What is 3-5%?
Assume the United States can produce 10000 books in one workday while Canada can produce only 5000. What type of advantage does the US have?
What is absolute advantage?
The low point of the business cycle, when the economy is at its worst, usually marked as one month.
What is a trough?
This institution is responsible for controlling the inflation rate in the US.
BONUS: What type of policy do they enact?
What is the Federal Reserve?
BONUS: Monetary Policy
The GDP calculation is C + I + G + NX. Name and explain two of these variables.
BONUS: Which of the variables above can sometimes be negative, and why?
Consumption, Investment, Government, & Net Exports.
BONUS: NX, Exports are positive and imports are negative, if imports are more than exports, it is a negative value.
The unemployment that results due to the shifting of the business cycle.
What is cyclical unemployment?
There are three factors that influence whether or not a country has an advantage in producing certain products. Name and describe at least one.
Climate, factors of production, technology.
There are three major causes of an economic downturn. Name and describe at least one of these causes.
Negative Economic Shock, Land Shortages, High Interest Rates, Saving
This type of inflation is extremely damaging to an economy and has occurred throughout various points in history.
What is hyperinflation?
There are four major criticisms of GDP. Name and explain at least one.
Standard of Living, Volunteering, Negative Externalities (Pollution), Black Market.
What is one method the government uses to lower the unemployment rate during recessions?
BONUS: What type of policy is this?
Unemployment benefits, stimulus checks, etc.
BONUS: Fiscal policy.
The United States can produce 10000 shirts per workday while China can only produce 8000. However, the United States has a much more limited population than China and would have to give up on making airplanes. Who should produce the shirts, and what type of advantage does this country have?
BONUS: Explain the economic reason why this is the case.
China, what is comparative advantage?
BONUS: Opportunity Cost