Download Economics Glossary: Business Cycles, Demand, Supply, Interest Rates, and Labor Market and more Quizzes Economics in PDF only on Docsity! TERM 1 Business Cycle DEFINITION 1 The temporary fluctuations around the long-run trend growth in real GDP. TERM 2 Aggregate Demand DEFINITION 2 A curve that shows the quantity of goods and services that households, firms, the government, and foreigners buy at each price level. TERM 3 Wealth Effect DEFINITION 3 As Price decreases, the purchasing power of money increases. Making consumers wealthier so they spend more. TERM 4 Interest Rate Effect DEFINITION 4 As Price decreases, the quantity of money demand decreases, which decreases interest rates. Leading firms to invest more. TERM 5 Aggregate Supply DEFINITION 5 A curve that shows the quantity of goods and services that firms choose to produce and sell at each price-level. TERM 6 Sticky Wage Theory DEFINITION 6 Wages are said to be "sticky-down" since they can move up easily but move down with difficulty. TERM 7 Short-run Aggregate Supply DEFINITION 7 Qty Output Supplied= Natural Rate Output + a(Actual P - Expected P) TERM 8 Long-Run Equilibrium DEFINITION 8 Aggregate Demand = Aggregate Supply = Long-run Aggregate Supply TERM 9 Short-Run Equilibrium DEFINITION 9 Aggregate Demand = Aggregate Supply TERM 10 Real Interest Rate DEFINITION 10 An interest rate that has been adjusted to remove the effects of inflation to reflect the real cost of funds to the borrower.Real Interest Rate = Nominal Interest Rate - Inflation (Expected or Actual) TERM 21 Compound Interest DEFINITION 21 (1 + r)^N year x $ TERM 22 Present Value DEFINITION 22 Amount of money today that would be needed, at prevailing interest rates, to produce a future amount of money. $(1 + r)^N year TERM 23 Adverse Selection DEFINITION 23 Those with high risk are more likely to want to buy insurance. Can lead to a lemon problem. TERM 24 Moral Hazard DEFINITION 24 Insurance against risk makes individuals more likely to act in a risky way. TERM 25 Risk-Return Tradeoff DEFINITION 25 Stocks return higher returns than bonds on average, but are more risky. TERM 26 Fundamental Analysis DEFINITION 26 Predicts that price equals the present value of expected future dividends. Try to predict future flow of profits and earnings. TERM 27 Employed DEFINITION 27 Includes self-employed, family business, part-time, vacation or temporarily not working. TERM 28 Unemployed DEFINITION 28 Not working. Has looked for employment in the previous 4 weeks. TERM 29 Not In Labor Force DEFINITION 29 Includes students, retirees, homemaker, discouraged workers. TERM 30 Labor Force DEFINITION 30 Total # of Workers = # Employed + # Unemployed TERM 31 Unemployment Rate DEFINITION 31 # Unemployed x 100 Labor Force TERM 32 Labor Force Participation Rate DEFINITION 32 Labor Force x 100Adult Population TERM 33 Cyclical Employment DEFINITION 33 The deviation of the unemployment rate from its natural rate. TERM 34 Frictional Unemployment DEFINITION 34 The period of time it takes for workers to find ideal job. Match workers skills to the needs of employers. TERM 35 Unemployment Insurance DEFINITION 35 Provides a fraction of salary to workers who lose their job. Encourahes unemployment.
