2.5 Economic growth Flashcards
Define actual growth.
The measure of changes in national GDP
What causes actual growth?
An outward shift in LRAS- Q squared CELL or an outward shift in AD.
What is potential growth?
How much the economy could produce at full employment.
What causes potential growth?
Q squared CELL.
What is a positive output gap?
When actual growth is greater than potential growth.
What is a negative output gap?
When actual growth is smaller that potential growth.
Why are output gaps difficult to measure?
As they may not have the large sample making it very off.
Why are output gaps difficult to measure?
As they may not have the large sample making it very off.
What happens when actual growth rate is slower than trend growth?
The fluctuations of actual growth become smaller.
What are the characteristics of a boom?
Low GOV spending
Increase in consumer spending
Lower unemployment
Rise in real income
Lower unemployment
What are characteristics of a recession?
Increase GOV spending
Decrease consumer spending
Higher unemployment
Fall in real income
