CHAPTER 32 CAUSES OF ECONOMIC GROWTH AND THE TRADE CYCLE Flashcards Preview

EDEXCEL THEME 2 MACRO ECONOMICS > CHAPTER 32 CAUSES OF ECONOMIC GROWTH AND THE TRADE CYCLE > Flashcards

Flashcards in CHAPTER 32 CAUSES OF ECONOMIC GROWTH AND THE TRADE CYCLE Deck (15)
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1
Q

Actual growth

A

Economic growth as measured by recorded changes in real GDP overtime

2
Q

Boom or peak

A

Period of time when the economy is growing strongly and is operating above its productive potential

3
Q

Demand- side shock

A

A sudden and large impact on aggregate demand

4
Q

Depression or slump

A

A period of the trade cycle when there is a partially deep and long fall in output

5
Q

Downturn

A

A period of the trade cycle when either economic growth or GDP itself is falling

6
Q

Economic growth

A

A rise in output in an economy which can be either actual growth or potential growth

7
Q

Economic recovery

A

The movement back from where the economy is operating below its productive potential to a point where it is at its productive potential

8
Q

Export-led growth

A

A rise in aggregate demand caused by a rise in exports

9
Q

Hysteresis

A

The process whereby a variable does not return to its former value when changed. In terms of the trade cycle, it is used to describe the phenomenon of an economy failing to return to its former long term trend rate of growth after a severe recession

10
Q

Potential growth

A

Economic growth as a measured by the changes in the productive potential of the economy overtime.

11
Q

Output gaps

A

The difference between the actual level of GDP and the productive potential of the economy. There is a positive output gap when actual GDP is above the productive potential of the economy and it is in boom. There is a negative output gap when actual GDP is below the productive potential of the economy.

12
Q

Recession

A

A period of the trade cycle when output or growth in output falls . The technical definition now used by the UK government is that if a recession occurs when growth in output is negative for two successful quarters (i.e. two periods of three months)

13
Q

Spare capacity

A

For a whole economy, this exits when long run aggregate supply is greater than aggregate demand and so there is a negative output gap.

14
Q

Supply-side shock

A

A sudden and large impact or aggregate supply

15
Q

Trade or business

A

Regular fluctuations in the level of economic activity around the productive potential of the economy. In business cycles, the economy veers from recession, when it is operating well below its productive potential, to booms when it is likely to be at or even is above its productive potential.