Economic Growth - Economic Growth Recession and...

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1. Question: How is the size of the economy- the GDP- determined and what makes it rise and fall over time? -This is the basic question of macroeconomics. 2. Demand=desire and ability to buy. 3. Businesses will not produce if they cannot sell- a business would go bankrupt if it produced but had no customers- so there must be demand for businesses to produce. 4. Demand fluctuates up and down over time. 5. Answer to Question: GDP is determined by demand and GDP rises/falls as demand rises/falls 6. Economic Growth= Increasing Real GDP Recession= Falling Real GDP 7. Link to Unemployment: Companies need for workers depends on how much they produce which depends on their sales which depend on spending =Demand Unemployment results when the Real GDP is not big enough to create enough jobs. Unemployment is the result of not enough spending in the economy Remember that GDP= C+I+G(x-m) Spending comes from 4 sources: 1. Consumer spending 2. Investment spending 3. Government Purchases 4. International Trade 8. So why does demand fluctuate? To answer this we must look separately
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Economic Growth - Economic Growth Recession and...

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