ECON 20B Chapter Notes - Chapter 33: Pessimism, Human Capital, Potential Output
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ECON 20B Full Course Notes
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Recession - a period of declining incomes and rising unemployment. Goal is now to explain short-run deviations from long-run trends. Fact 1: economic fluctuations are irregular and unpredictable. Fluctuations in the economy are often called the business cycle. The term business cycle is misleading because it suggests that economic fluctuations follow a regular, predictable pattern. In fact they are irregular, and impossible to predict with much accuracy. Real gdp is the variable most commonly used to monitor short-run changes in the economy because it is the most comprehensive measure of economic activity. Total income adjusted for inflation of everyone in the economy. Measures the value of all final goods and services produced within a given period of time. For monitoring short-run fluctuations, it does not matter which measure of economic activity one looks at. Most macroeconomic variables that measure some type of income, spending, or production fluctuate closely together.