3. Economic Growth- 26

Question 0

Business cycle

Answer 0

Regular fluctuations in the level of economic activity around the productive potential of the economy. The economy veers from recession, to booms.

Question 1

Boom

Answer 1

Period of time when the economy is growing strongly and is operating around its productive potential

Question 2

Economic Growth

Answer 2

Growth in the productive potential of the economy. It is typically measured by growth in real GDP.

Question 3

Economic recovery

Answer 3

The movement back from where the economy is operating below its productive potential to a point where it is at its productive potential.

Question 4

Output gap

Answer 4

The difference between the actual level of GDP and the productive potential of the economy. There is a positive output gap when actual GDP is above the productive potential of the economy and it is is in boom. There is a negative output gap when actual GDP is below the productive potential of the economy