week 6 Flashcards

1
Q

business cycles - recessions

A
  • 2 quarters in which the rate of growth of real GDP is negative
  • coincided with a sharp increase in the rate of unemployment
  • fluctuations in economic activity are difficult to predict and are irregular in length
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2
Q

potential output

A
  • amount of output the economy is capable of producing when using
  • > labour and capital
  • it will grow with capital, labour and productivity
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3
Q

output gap

A
  • how far is actual output from potential level?
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4
Q

okuns law

A
  • in aus, each 1% of unemployment leads to a fall of gdp of 1.8%
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5
Q

keynesian model

A
  • applies only to short run
  • not a long run growth model
  • price levels fixed
  • AD determines GDP
  • Role of model is to evaluate role of government in stabilising markets
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6
Q

disequilibrium

A
  • sales are more than expected
  • low inventory
  • low supply
  • less than expected
  • high inventory
  • excess supply
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7
Q

paradox of thrift

A
  • in short run, increase saving means a fall in planned expenditure and lower equilibrium level of GDP
  • increase saving failed
  • consumption spending is a virtue
  • saving in recession can be harmful
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