The Trade Cycle

Question 1

What are the characteristics of a boom?

Answer 1

• high rates of economic growth
• positive output gaps
• full employment
• demand - pull inflation
• consumers and firms have a lot of confidence —> High rates of investment
• gov budgets improve

Question 2

what is a recession? And what are the characteristics?

Answer 2

• a recession is economic growth over two consecutive quarters
• There’s a negative economic growth
• spare capacity and negative output
• demand - deficit
• less confidence amongst consumers and firms