Lesson 24 - Trade Cycle and Economic Growth Flashcards
What are the four stages of the economic cycle?
Boom, slowdown, recession, recovery
When does an economic boom occur?
A boom occurs when real national output is rising at a faster rate than the trend.
What are the consequences of a boom?
A positive output gap
When does an economic slowdown occur?
An economic slowdown occurs when the rate of growth decelerates but national output is still rising.
What is the definition of a recession?
A recession means a fall in the level of real national output.
What are the consequence of a recession?
A negative output gap
High unemployment
Low investment
Cost of living crisis
Worsening living standards and quality of life.
When does an economy experience a recovery?
A recovery occurs when real of GDP picks up from the trough reached at the low point of the recession.
What happens to the output gap during a recession?
The output gap shrinks
What are the causes of the trade cycle?
Momentum effect
Interest rate changes
Technology
Potential business cycle
World economy
What is the momentum effect?
Positive economic growth leads to increased consumption, investment and asset prices etc.
What is the likely impact of higher interest rates?
Higher interest rates can lead to an economic downturn.
What is the likely impact of improvements in technology?
Improvements in technology may cause a boost in economic growth.
When do most governments implement policies designed to stimulate a boom?
Before a general election
What impacts do recessions in other countries have upon the UK economy?
Recessions in other countries impact upon export earnings and investment.
Give one benefit of economic growth?
Higher living standards
