ECON 1102 Lecture Notes - Lecture 6: Nominal Rigidity, Potential Output, Business Cycle
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Explain why economists focus on gdp, unemployment, and inflation when assessing the health of an entire economy. Discuss why sustained increases in living standards are historically recent phenomena. Describe why expectations, shocks, and sticky prices are responsible for short-run. Identify why saving and investment are key factors in promoting rising living standards. fluctuations in output and employment. Characterize the degree to which various prices in the economy are sticky. Explain why the greater flexibility of prices as time passes causes economists to use different macroeconomic models for different time horizons. Assessing the health of the economy: performance and policy. A recession is a period of decline in total output, income, and employment. The business cycle refers to recurring increases and decreases in the level of economic activity over periods of years. To assess the health and development of an economy, macroeconomists focus on three variables: real gdp.