economic cycle

Question 1

macro objective for growth

Answer 1

growth to be strong sustain and sustainable. real gdp over time, upwards slope on graph

Question 2

straight up sloping line on graph

Answer 2

it is the trend growth

Question 3

curvy slopping line on graph

Answer 3

actual growth

Question 4

what are the four different stages

Answer 4

boom, recession, trough, recovery

Question 5

boom

Answer 5

peak on actual growth, when the growth is ramped. high profits, low unemployment, high consumer and business confidence, high demand, rising tax revenue, inflation

Question 6

recession

Answer 6

two successive quarters of negative growth. declining AD, negative output gap, high unemployment, sharp falls in confidence and investment.

low consumer confidence, low demand for non essential products

low inflation

tax reduction, low gov spending

Question 7

trough

Answer 7

lowest point on the actual growth after a recession. de-stocking and discounting, fall house prices and construction, lower inflation, low demand for imports

Question 8

recovery

Answer 8

when the economic starts growing after a trough.
rising consumer confidence, rising business confidence, higher investment, increase in construction.
looser gov policies
decrease in unemployment
- increase in income
-

Question 9

output gaps

Answer 9

when the actual growth is above the potential growth, negative positive.

Question 10

what are shocks

Answer 10

unpredictable fluctuations in actual growth.

Question 11

demand side shocks

Answer 11

shocks to aggregate demand. increase in interest rates, sudden cut gov spending, house market crash, financial banking crash all of which can cause a recession

Question 12

supply side shocks

Answer 12

shocks to LRAS and SRAS, natural resource, increase in wages and resources and raw materials all of which can cause recession

Question 13

diagram pic

Answer 13