ECON 1BB3 Lecture Notes - Lecture 12: Business Cycle, Price Level

• School: McMaster University
• Department: Economics
• Course: ECON 1BB3
• Professor: Bridget O' Shaughnessy

Document Summary

If gdp increases, unemployment decreases and vice versa. 2 consecutive quarters (6 months) of declining gdp is considered a recession. Ad: y = c + i + g + nx. Lras: y = a * f (k, l, h, n) Sras: y = + a (p pe) The model is in equilibrium at the intersection of ad and sras. If this point also coincides with the lras curve, then the economy is in the long run equilibrium (when all curves intersect at one point) If y> , the economy is in a boom. If y< , the economy is in a recession. Positive net export shock: us finally comes roaring out of their recession, candian exports increase, price level increases, gdp increases, unemployment decreases. Negative supply shock: price of oil increases, high inflation, high unemployment.