2.5.3 - Trade (business) cycle Flashcards
What’s the definition of a trade-cycle?
Variations in the level of productive capacity of an economy over time.
What is productive capacity (or potential) ?
Productive capacity is the maximum amount of goods services that we can produce with the resources we have available
What is gross domestic product (GDP) ?
The value of goods and services produced in the economy over a period of time.
What is the diagram for a trade cycle?
*draw it if possible
Page 193 of the theme 2 booklet
How do you calculate real GDP?
Real GDP = GDP growth - Inflation
What doe/s the dotted line on the trade cycle diagram represent?
The trend rate of economic growth.
What is the trade cycle also known as?
The business cycle or the economic cycle.
What is the Y axis labelled as on the economic cycle?
GDP
What is the X axis labelled as on the trade cycle diagram?
Time
What is a boom?
A boom is a period of high levels of economic activity.
Name 2 things in which a boom can be catergorised by.
- High rate of economic growth
- High demand
- Low unemployment
- Infaltionary pressure
- Labor skills shortage
- High confidence in the economy
- Capital investment is high
What is unemployed?
This is when someone is willing, able to work and actively looking for a job but cannot find one.
What is economic growth?
An increase in the real value of goods and services produced in a country or area as measured by the annual percentage change in real national output.
What is inflation
The rate of change in the average price level over time.
What is a recession?
This is when the rate of economic growth starts to fall into a downturn. If real GDP falls for 6 months then this is known as a recession.
