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Cards In This Set
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Business cycle
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Recurring increases and decreases in the level of economic activity over periods of years; consists of peak, recession, trough, and expansion phases
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Peak
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The point in a business cucle at which business activity has reached a temporary maximum; the economy is near or at full employment and the level of real output is at of very close to the economy's capacity
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Recession
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A period of declining real GDP, accompanied by lower real income and higher unemployment
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Trough
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The point in a business cycle at which business activity has reached a temporary minimum; the point at which a recession has ended and an expansion (recovery) begins
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Expansion
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A phase in the business cycle in which real GDP, income, and employment rise
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Labor force
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Persons 16 years of age and older who are not in institutions and who are employed or are unemployment and seeking work
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Unemployment rate
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The percentage of the labor force unemployed at any time
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Discouraged workers
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Employees who have left the labor force because they have not been able to find employment
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Frictional unemployment
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A type of unemployment caused by workers voluntarily changing jobs and by temporary layoffs; unemployed workers between jobs
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Structural unemployment
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Unemployment of workers whose skills are not determined by employers, who lack sufficient skill to obtain employment, or who cannnot easily move to lovations where jobs are available
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Cyclical unemployment
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A type of unemployment caused by insufficent total spending (or by insufficent aggregate demand)
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Full-employment rate of unemployment
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The unemployment rate at which there is no cyclical unemployment of the labor force; equal to between 4 and 5 percent in the United States because some frictional and structural unemployment is unavoidable
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Natural rate of unemployment (NRU)
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The full-employment unemployment rate; the unemployment rate occuring when there is no cyclical unemployment and the economy is acheiving its potential output; the unemployment rate at which actualy inflation equals expected inflation
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Potential output
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The real output (GDP) an economy can produce when it fully employs its available recources
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GDP gap
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Actual gross domestic product minus potential output; may be either a positive amount (a positive GDP gap) or a negative amound (a negative GDP gap)
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