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
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
3
Q
output gap
A
- how far is actual output from potential level?
4
Q
okuns law
A
- in aus, each 1% of unemployment leads to a fall of gdp of 1.8%
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
6
Q
disequilibrium
A
- sales are more than expected
- low inventory
- low supply
- less than expected
- high inventory
- excess supply
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