ECO 1102 Lecture Notes - Lecture 19: Aggregate Demand, Classical Dichotomy, Economic Equilibrium

• School: University of Ottawa
• Department: Economics
• Course: ECO 1102
• Professor: Gordon Lenjosek

Document Summary

Economy grows due to increase labor force, capital stock and technology. In other years, there are recessions, which are accompanied by declining real gdp and rising unemployment. Expansions: periods of rising real gdp and falling unemployment. Recessions: periods of falling real incomes and rising unemployment. Short-run economic uctuations are often called business cycles. Recessions: two or mire consecutive quarters of falling real gdp. Business cycles are anything but regular and predictable. Investment falls during recessions (a key contributor to declines in real gdp). Incomes, consumer spending, sales, pro ts, tax revenues (budge de cit rises), stock prices and imports fall. Most economists use the model of ad and as to study economic uctuations. Most economists believe the classical theory describes the world in the long run, but not in the short run. In the short run, changes in nominal variables can affect real variables.