ECON 209 Lecture Notes - Lecture 19: Output Gap, Potential Output, Business Cycle
19 Jul 2016
School
Department
Course
Professor
Document Summary
Macroeconomics: study of determination of economic aggregates (eg total output, total employment, price level, rate of economic growth) Nominal national income: total national income in current dollars can be changed by quantity or price. Real national income: national income measured in constant (base period) dollars only changes with quantities. Business cycle: fluctuations of national income around its trend value that follow wavelike pattern. Trough: unemployed resources, output low in relation to economy"s capacity to produce substantial unused productive capacity, low confidence. Peak: existing capacity used to high degree (labour shortages may develop, shortages of raw materials) costs & prices rise. Recession: downturn in level of economic activity, real gdp falls for 2 consecutive quarters. Actual output < potential output: recessionary gap = market value of goods/services not produced, economy"s resources not fully employed. Actual output exceeds potential: inflationary gap = market value of production in excess of what economy can produce on sustained basis, inflationary pressure.
