Economic Cycle (Quizlet Revision Activity)

Here is a Quizlet revision activity covering key terms relating to the economic cycle.

Key term summary for revision

Accelerator effect

When investment is linked positively to expected growth of consumer demand

Animal spirits

State of confidence or pessimism held by consumers and businesses

Credit crunch

When the commercial banks restrict their lending to businesses and households

Cyclical unemployment

A rise in the jobless rate caused by a contraction of aggregate demand

Depression

A prolonged slump leading to a decline in real GDP of at least 10 percent

Double dip recession

When an economy contracts twice without a full recovery in between

Economic boom

Rapid growth of real GDP that takes an economy above trend.

Economic shocks

Unpredictable events such as volatile prices for oil, gas and foodstuffs.

Fine tuning

Changes in economic policy designed to gradually influence demand, output and prices

Forecast

A prediction made about the likely future performance of an economy

Inventories

Stocks of finished products and components

Output gap

The difference between real GDP and potential GDP

Peak

The high point of the economic cycle beyond which a recession starts

Real disposable income

Income after taxes and benefits adjusted for inflation

Recession

Contraction in economic activity lasting at least six months

Slowdown

A fall in the rate of growth but not a full-scale recession

Target

An objective of government policy e.g. low inflation or rising employment

Trade-off

Implies choices have to be made between different objectives e.g. prices and jobs

Trend growth

Long term average growth of real GDP

Trough

The low point of the cycle beyond which a recovery starts