FIN30220 Study Guide - Midterm Guide: Potential Output, Great Moderation, Business Cycle
Document Summary
Business cycle: alterations of periods of rapid or slow growth in real gdp (fluctuations) Key features: there is a business cycle- recurring patterns of recessions, expansions , trend increase in gdp over time, every business cycle is unique. The business cycle of late has been much less severe than that of previous years. Chart 1: gdp: value of final g/s for everything that gets produced in country- most common measure of nation"s well-being. Composition of gdp: y c + i + g + (x-o: c = consumption, i = investment (purchases by firms), g = gov"t expenditures, (x-o) = nx = net exports = exports imports. Consumption is the largest component of gdp (~70%) Investment is the most variable component of gdp. (x-o)- we"ve been running a trade deficit every year since my birth. Gdp is more volatile than consumption due to the variability in investment.
