Business Cycle And GDP Flashcards
What are the four stages of the business cycle?
- boom
- recession
- slump/depression
- recovery
What happens during a boom? (3)
- demand for goods and services and production is high
- consumer confidence to spend money is high
- businesses invest and expand
What happens during a recession? (3)
- businesses reduce output and labour costs as incomes and demand fall
- unemployment increase
- less spending by consumers (more unemployment)
What is the technical definition of a recession?
Fall in GDP in two successive quarters
What happens during a slump? (3)
- many firms go out of business
- consumer demand is very low
- unemployment is very high
What happens during a recovery? (3)
- output (GDP) rises
- rising demand means firms hire labour
- increase in consumer confidence
What is a Gross Domestic Product?
Measures the total market value of all final goods and services produced in an economy in a given year
What is not included in a GDP? (3)
- buying used products/companies
- illegal activity
- household production
Why was GDP invented?
To account for national income
What are the three phases used the define GDP?
- total market value
- final goods and services
- produced within an economy
What is the total market value in a GDP?
The value of a good or service is determined by the price paid for that item in the market place
- add them= total value of GDP
What does final goods and services mean in GDP?
The use of final refers to goods sold to an end user
- final good has to be sold to a consumer, instead of being used to produce another good
What does ‘produced within an economy’ mean to GDP?
Only goods and services produced within a countries border count in that nations GDP
What are the four components of GDP?
- consumer spending (consumption)
- business spending (investment)
- government spending
- net exports
What is nominal GDP?
GDP presented in its unadjusted form
