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business cycle
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the short-run alternation between economic downturns, known as recessions, and economic upturns, known as expansions
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depression
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a very deep and prolonged downturn
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recession
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periods of economic downturns when output and employment are falling
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expansion
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also known as recoveries; periods of economic upturns when output and employment are rising
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employment
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is the number of people currently employed in the economy
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unemployment
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is the number of people who are actively looking for work but are not currently employed
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labor force
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is equal to the sum of employment and unemployment
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unemployment rate
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the percentage of the labor force that is employed
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output
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the quantity of goods and services produced
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aggregate output
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the economy's total production of goods and services for a given time period
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inflation
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rising overall price level
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deflation
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a falling overall price
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price stability
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in the economy when the aggregate price level is changing only slowly
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economic growth
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an increase in the maximum amount of goods and services an economy can produce
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model
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a simplified representation used to better understand a real-life situation
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other things equal assumption
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all other relevant factors remain unchanged; also known as the ceteris paribus assumption
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