BUSAD 120 Chapter Notes - Chapter 1: Aggregate Demand, Business Cycle, Foreign Exchange Market
Document Summary
Economic activity changes from year to year. In many years, the production of goods and services rises. For example, australian real gdp growth has been positive for the last 30 odd years. (economic growth is simply the proportional time rate of change of real gdp). Recessions: a period of declining real output and real incomes (y ) and rising unemployment (u ). Depressions also occur occasionally: severe and prolonged recessions (e. g. worldwide in. Macroeconomics develops theories to explain these periods of (a) prosperity and (b) short or long sub-optimal performance. Economic changes and recessions are fairly irregular and unpredictable. Fluctuations in the economy are often called the business cycle (boom & bust, economic growth & recession, economic upturns & downturns etc), or the trade cycle. Sometimes recessions occur close together, while at other times the economy goes many years without a recession. To study these short run fluctuations, we use a model known as the aggregate demand .