Chapter6Summary

Chapter6Summary - Chapter 6 Summary Tucker, Macroeconomics...

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Chapter 6 Summary Tucker , Macroeconomics for Today , 5th Edn. 1. Potential economic performance has thus far been viewed as operating at a point on, rather than inside, the production possibilities schedule. In order to achieve this maximum point of production, we have assumed that a society would use all of its resources, and each in its most efficient manner. However, resource owners may not choose to commit all of the resources they own to the production process at any given time. Examples would be full-time students in college who do not work, or housewives who engage in productive activity only at home. Hence, we redefine at the beginning of this chapter a new production possibilities schedule--the "institutional" PPC--that shows the maximum amount of output that could be produced with the resources that resource owners wish to commit to the production process. This "institutional" production possibility is located inside the "physical" production possibilities schedule of Chapter 2. 2. GDP measures the actual level of economic activity, as defined in Chapter 5. The gap between the actual level of production (as defined by GDP) and the potential level of production (as defined by the "institutional" PPC) is not a constant amount, but rather fluctuates from one year to the next in a market economy. These cyclical fluctuations are termed "the business cycle." The stages of the business cycle are described as peak , recession, recovery and
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Chapter6Summary - Chapter 6 Summary Tucker, Macroeconomics...

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