ECON 200 Lecture Notes - Lecture 17: Aggregate Demand, Aggregate Supply, Gdp Deflator
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18 Nov 2016
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Recession: a period of declining real incomes and rising unemployment. If the recession becomes more severe, it turns into a depression. Economists use the model of aggregate demand and aggregate supply to analyze short-run fluctuations. Short-run fluctuations in economic activity have occurred in all countries throughout history. Fact 1: economic fluctuations are irregular and unpredictable. When real gdp grows rapidly, business is good, customers are plentiful, and profits are growing. When real gdp falls during recessions, businesses have trouble, sales decline, and profits dwindle. Economic fluctuations are not at all regular, and are almost impossible to predict with much accuracy. Real gdp is the variable most commonly used to monitor short-run changes in the economy because it is the most comprehensive measure of economic activity. Measures the value of all final goods and services produced within a given period of time, and the total income (adjusted for inflation) of everyone in the economy.