ECON 211 Lecture Notes - Lecture 20: Aggregate Supply, Market Basket, Government Debt

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16 Mar 2017
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Over the long-run, there will be an upward trend in economic growth. In the short-run there can be fluctuations in the economy. Positive and negative rate of economic growth. Peak-- business activity reaches a temporary maximum. Recession-- period of decline in total output (6 months or longer) Trough--output or production reaches its lowest point. Decline in total output, income, and employment which lasts six months or longer. Shocks lead to business cycles: expectations about the future affect business decisions, but future is uncertain, changes in expectations will change business behavior, unmet expectations create shocks. Instability in financial institutions and markets for businesses and the economy. Unexpected changes in total spending that leads to demand shock. Businesses cannot easily adjust to the change. In the short-run, businesses handle shocks with either. And quantity changes leads to problems for the economy. So employment of workers is the same. But production is inefficient if it goes too high or low.

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