chapter12notes

chapter12notes - resources: Y* h Output gap potential (Y*)...

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Chapter 12: Short-term economic fluctuations: an introduction: h Recession: when nations economy is growing at a rate below normal o Characteristics of it: Depression- long recession Informal def- when lasts for 2 consec quarters Peak- high point before a recession (it curves down) Trough- lowest point during a recession; starts to go up after Longest was Great Depression 43months h Expansion: when nations economy is growing at a rate above normal o Characteristics of it Boom- Usually expansions are longer than recession Most recent: 2001 4 factors to measure strength of economy industrial production total sales nonfarm employment disposable income of households Real GDP Peak Trough ←→ ←→ ←→ Expansion Recession Expansion (or “Recovery”) Time h Potential Output- how much output (real gdp) an economy can produce with give
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Unformatted text preview: resources: Y* h Output gap potential (Y*) actual (Y) o Recessionary gap- Y* > Y Can make more than what u are making currently o Expansionary gap = Y > Y* Making more than expected h Economists wish to stabilize the economy by eliminating output gap, whether it is expansionary/recessionary h Natural rate of employment frictional + structural o Always there o Frictional unemployment that happens in a changing economy (shortterm) o Structural workers have certain skill and there is no job available for that skill (longterm) h Cyclical- extra during a recession Chapter 12: Short-term economic fluctuations: an introduction: h Cyclical = actual natural ; actual = cyclical+ natural h Okuns Law: cyclical unemployment goes up by 1% and output gap does up by 2%...
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This note was uploaded on 04/16/2008 for the course ECON 100 taught by Professor Kasilwal during the Fall '07 term at CSU Long Beach.

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chapter12notes - resources: Y* h Output gap potential (Y*)...

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