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ECON 1100 (224)
Chapter 7

Chapter 7 Short-Term Economic Fluctuations

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University of Guelph
ECON 1100
Eveline Adomait

Chapter 7: Short-Term Economic Fluctuations Tuesday, January 29, 20132:02 PM 7.1 Recessions and Expansions Definitions Recession- a period in which the economy is growing at a rate significantly below normal Depression- a particularly severe or protracted recession Peak- the beginning of a recession, the high point of economic activity prior to a recovery Trough- the end of a recession, the low point in economic activity prior to a recovery Expansion- a period in which the economy is growing at a rate significantly above normal Boom- a particularly strong and protracted phase of an expansion 7.3 Measuring Fluctuations: Output Gaps and Cyclical Unemployment Definitions Potential Output (Potential GDP) - the amount of output (real GDP) that an economy can produce when using its resources, such as capital and labour, at normal rates Output Gap- the difference between the economy's actual output and its potential output at point in time Recessionary Gap- a negative output gap, which occurs when potential output exceeds actual output Expansionary Gap- a positive output gap, whic
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