Class Notes (1,100,000)
CA (630,000)
UTSG (50,000)
ECO (2,000)
ECO100Y1 (400)
Lecture

Kondratieff Cycle Notes


Department
Economics
Course Code
ECO100Y1
Professor
Jack Carr

This preview shows half of the first page. to view the full 1 pages of the document.
Kondratieff Cycle:
- Long term business cycle t 50-60 years
- Periodic fluctuation in rate of economic activity
- Measured by levels of employment, prices, and production
- Prosperity, recession, depression, recovery
- Upswing vs. downturn (Van Dujin and Mensch)
Multiplier-Accelerator Mechanism
- Function of change in y (output)
- Investment increases Æ multiplier increases Æ spending changes
- Accelerator = K t Y ratio
o Greater than 1, high K-Y Ratio
o Consumption affecting investment
- Multiplier
o Expenditure; person receiving money spends it, continues
o investment spending translates to some degree to increased earnings for some in the economy
and also allows for increased government spending
o increase I = change in multiplier
o backward/forward investment linkage
- give rise to cyclical responses to initial shocks
- economic output depends on the level of the investment
o investment determines the level of aggregate output (multiplier), and is determined by
aggregate demand (accelerator)
- increase in government expenditure Æ increase in consumer incomes Æ (through the multiplier effect)
increase in output Æ(through the accelerator process) raises investment
- cyclical basis.
- Simulate consumption and investment
o Y = C + I
o I = B/3(Yt-1 t Yt-2); if Yt-1 > Yt-2, increase output
- multipier makes output rise following a rise in investment
- accelerator makes investment increase when output increases
Strong Accelerator: economy expansion
Weak Accelerator: expansion slows, decrease investment, decrease incomes Æslump follows (capital wears out)
Æeconomy expands again only when capital has fallen sufficiently relative to output that addition investment is
needed
William Lewis t GDP/Power Of Productivity
1) undistorted competition in the product market (productive = winner)
a. market distortions explain difference in GDP across countries
2) innovations = increased productivity, increased profits, increase investments, obtain market share
3) government influence restricts productivity growth
a. protections
b. tax
www.notesolution.com
You're Reading a Preview

Unlock to view full version