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Chapter 14
Vocabulary
| Term | Definition |
|---|---|
| Index of Leading Indicators | composite index of 11 economic series that move up and down in advance of changes in the overall economy; statisical series used to predict business cycle turning points |
| Econometric Model | set of assumptions in a table, graph, or equations used to describe or explain economic behavior |
| Depression Scrip | currency issued by towns, chambers of commerce, and other civic bodies during the Great Depression of the 1930s |
| Depression | state of the economy with large numbers of unemployes, declining real incomes, overcapacity in manufacturing plants, general economic hardship |
| Trend Line | growth path the economy would follow if it were not interrupted by alternating periods of recession and recovery |
| Expansion | period of growth of real GDP; recovery from recession |
| Trough | point in times when real GDP stops declining and begins to expand |
| Peak | point in time when real GDP stops expanding and begins to decline |
| Recession | decline in real GDP lastiing at least two quarters or more |
| Business Fluctuation | changes in real GDP marked by alternating periods of expansion and contraction that occur on a less than systematic basis |
| Business Cycle | systematic changes in real GDP marked by alternating periods of expansion and contraction |
| Unemployed | state of working for less than 1 hour per week for pay or profit in a non-family owned business, while being available and having made an effort to find a job during the past month |
| Unemployment Rate | ratio of unemployed individuals divided by total number of persons in the civilian labor force, expressed as a percentage |
| Frictional Unemployment | unemployment caused by workers changing jobs or waiting to go to new ones |
| Structural Unemployment | unemployment caused by a fundamental change in the economy that reduces the demand for some workers |
| Cynical Unemployment | unemployment directly related to swings in the business cycle |
| Seasonal Unemployment | unemployment caused by annual changes in the weather or other conditions that prevail at certain times of the year |
| Technological Unemployment | unemployment caused by technologicals or automation that make soe workers' skills obsolete |
| Automation | production with mechanical or other processes that reduces the need for workers |
| Price Level | relative magnituse of prices at a given point in time as measured by a price index |
| Deflation | decrease in the general level of prices of goods and services |
| Creeping Inflation | relatively low rate of inflation, usually 1 to 3 percent annually |
| Galloping Inflation | relatively intense inflation, usually ranging from 100 to 300 percent annually |
| Hyperinflation | abnormal inflation in excess of 500 percent per year; last stage of a monetary collapse |
| Lorenz Curve | curve showing how much the actual distribution of income differs from an equal distribution |
| Welfare | government or private agency programs that provide general economic and social assistance to the needy individuals |
| Food Stamps | government-issued coupons that can be exchanged for food |
| Workfare | program requiring welfare recipients to provide labor in exchange for benefits |
| Negative Income Tax | tax system that would make cash payments in the form of tax refunds to individuals when their income falls below certain levels |
| Poverty Guidelines | annual dollar amounts used to evaluate the money income that families and unrelated individuals receive |
| Earned Income Tax Credits (EITC) | special tax credit that provides federal tax credits and sometimes cash to low-income workers |
| Enterprise Zone | areas where companies can locate free of some local, state, and federal tax laws and other operating restrictions |
| Identify the two main phases of a business cycle. | Recession and Expansion |
| List five causes of business cycles. | Capitol expenditures, inventory adjustments, innovation and imitation, monetary factors, and external shocks |
| Describe how the government collects monthly data on employment. | First, the Bureau of the Census takes a survey of 50,000 households, covering all 50 states. In this survey, it targets unemployed individuals. Then, they turn it over to the Bureau of Labor Statistics for analysis and publication. |
| Examine the similarities and differences between structural and technological unemployment. Why are these kinds of unemployment serious problems for the economy? | Structural unemployment occurs when there is a shift in the operations of an economy and workers' skills and abilities no longer needed. Technological unemployment is caused when workers with less skills are replaced by machines that do their jobs. |
| Describe how the CPI is used to compute the inflation rate. | The CPI is used to compute the inflation rate with formula. |
| List the five explanations for the causes of inflation. | Excessive demand, federal government's deficit, rising input costs, an unexpected increase in the cost on nonlabor inputs, and excessive monetary growth. |
| Identify four ways inflation destabilizes the economy. | The dollar buys less, inflation can cause people to change their spending habits, it tempts some people to speculate heavily in an attempt to take advantage of a higher price, and inflation alters the distribution of income. |
| List the five main reasons for inequality of income. | Education, wealth, discrimination, ability and monopoly power |
| Identify the major programs and proposals designed to alleviate the problem of poverty. | Income assistance, general assistance, social service programs, tax credits, enterprise zones, workfare programs, and negative income tax |
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