Chapter 19

Chapter 19 - Macroeconomics 10 January 2008 Ch. 19 GDP...

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Macroeconomics – 10 January 2008 – Ch. 19 GDP – Growth and Short Run fluctuations Real GDP fluctuates around a rising trend. The trend shows long run economic growth The short run fluctuations in the economy. Potential output is what the economy could product if all resources were employed at their normal levels of utilization. (e.g. capital used at a normal rate) – it is estimated and sometimes called full employment output. The output gap measures the difference between the potential output and actual output. – controversy is generated due to gap created. OUTPUT GAP = Y – Y* When OUTPUT is below the potential gap, this is known as a recessionary gap. This shows for e.g. that labor not being used at a normal rate, i.e. unemployment. When OUTPUT is above potential gap, this is known as an inflationary gap. Excess and intensive use of capital, land and labor. – this allows a push up of prices in all aspects. NEED TO KNOW DISTINCTION BETWEEN RISING GDP THAT IS
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This note was uploaded on 04/07/2009 for the course ECON 295 taught by Professor Ragan during the Spring '08 term at McGill.

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Chapter 19 - Macroeconomics 10 January 2008 Ch. 19 GDP...

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