ch19 - A First Look At Macroeconomics Origins and Issues of...

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Chapter 19 A First Look At Macroeconomics Origins and Issues of Macroeconomics Macroeconomics was born in the Great Depression , a decade (1929-1939) of high unemployment and stagnant production throughout the world economy. Economic Growth Economic growth is the expansion of the economy’s production possibilities. This is measured by real gross domestic product , or real GDP . When all the economy’s labour, capital, land, and entrepreneurial ability are fully employed, the value of production is called potential GDP . Real GDP fluctuates around potential GDP and the rate of long-term economic growth is measured by the growth rate of potential GDP. Potential GDP growth was rapid from 1960 to 1974. The growth rate of output per person sagged from the mid-1970s to the mid- 1990s in a phenomenon called the productivity growth slowdown . A business cycle is the periodic but irregular up-and-down movement in economic activity. It is measured by fluctuations of real GDP around potential GDP. Every business cycle has two turning points: o Peak o Trough And every business cycle has two phases: o Recession o Expansion A recession is a period during which real GDP decreases—the growth rate of real GDP is negative—for at least two successive quarters. An
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This note was uploaded on 06/30/2009 for the course ECON 1020 taught by Professor Parkin during the Spring '09 term at UWO.

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ch19 - A First Look At Macroeconomics Origins and Issues of...

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