the business cycle Flashcards
what does the business cycle show
recurring trends in economic growth rates, booms and recessions.
characteristics of a boom
high rates of economic growth
low unemployment
demand pull inflation
high consumer and business confidence
lower budget deficit, begin to pay down on debt
recession definition
two or more consecutive quarters of negative economic growth
characteristics of a recession
negative growth rates
high unemployment
low inflation
low business and consumer confidence
larger budget deficit and more national debt
how does the accelerator effect link to the business cycle
investment depends on the rate of change of economic growth. in rising GDP times investment will be high to meet future demand, times of recession, low investment.
what does a boom look like on a diagram
PPC= outside the PPC
CLASSICAL= SRAS=AD outside LRAS
business cycle : gdp above trend line
what does a recession look like on a diagram
PPC: inside PPC
business cycle: underneath tend line GDP
LRAS: inside LRAS
why are there ‘ceilings’ in the economic/business cycle?
when maximum output is reached
why are there floors in the economic/business cycle
because firms must invest a minimum amount to replace worn out machines
what is the business cycle
short term fluctuations in real GDP and its long term trend
slowdown definition
a weakening rate of economic growth, still increasing but at a slower rate
recovery definitiion
after a recession where real gdp increases and unemployment falls
depression definition
a prolongued downturn in the economy where a nations real gdp falls by at least 10% from peak to trough
real gdp
the value of all goods and services produced in a country in a year adjusted for inflation
nominal gdp
the value of all goods and services produced in a country in a year not adjusted for inflation
