primer tema -First-Look-at-Macro-Study-Guide

primer tema -First-Look-at-Macro-Study-Guide - Chapter 4 A...

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65 4 A FIRST LOOK AT MACROECONOMICS* Key Concepts ± Origins and Issues of Macroeconomics Modern macroeconomics began during the Great De- pression , 1929–1939. The Great Depression was a decade of high unemployment and stagnant produc- tion throughout the world. Macroeconomics initially focused on short-term problems, such as high unem- ployment. Recently long-term problems, such as eco- nomic growth, have come to be considered vital. ± Economic Growth and Fluctuations Economic growth is the expansion of the economy’s production possibilities. It is measured by the increase in real gross domestic product , also called real GDP . Real GDP is the value of the total production of all the nation’s farms, factories, shops, and offices measured in the prices of a single year. Potential GDP is the quantity of real GDP that is produced when all the economy’s labor, capital, land, and entrepreneurial ability are fully employed. The productivity growth slowdown was the slowing of the growth rate of output per person that occurred during the 1970s. The periodic but irregular up-and-down movement in production is the business cycle . It occurs as real GDP fluctuates irregularly around potential GDP. A business cycle has four parts: Trough — the lower turning point, when a reces- sion ends and an expansion begins. Expansion — a period of time during which real GDP increases. Peak — the upper turning point, when an expan- sion ends and a recession begins. Recession — a period during which real GDP decreases for at least two successive quarters. This chapter is Chapter 20 in Economics . The most recent recession began in the first quarter of 2001 and ended in the fourth quarter of 2001. This recession was milder than previous recessions. A depres- sion is a severe recession. Between 1976 and 2006, the growth rate of real GDP in the United States was about equal to that of the rest of the world but was more variable. Between 1996 and 2006, of the advanced econo- mies Japan grew the slowest and the newly indus- trialized nations of Asia grew the fastest. The Lucas wedge is the accumulated loss of output that results from a slowdown in the growth rate of real GDP per person. The productivity growth slowdown of the 1970s has created a Lucas wedge of $72 trillion. The Okun gap (the output gap ) is the gap between real GDP and potential GDP. The recessions since 1973 have created an accumulated Okun gap of $3.3 trillion. Economic growth expands future consumption possi- bilities. However, economic growth allows less current consumption as resources must be devoted to capital accumulation and might lead to more rapid depletion of resources and more pollution. ± Jobs and Unemployment
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primer tema -First-Look-at-Macro-Study-Guide - Chapter 4 A...

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