Académique Documents
Professionnel Documents
Culture Documents
Measuring Output:
GDP (Gross Domestic Product): is the value of all final goods and services (beer, cars,
books, health care, concerts…) produced in a country during a year.
Potential GDP: is the long-run trend in real GDP. It represents the long run productive
capacity of the economy. It is the maximum amount of output an economy can
produce while maintaining stable prices. It is also called “the high-employment level
of output.” When an economy is operating at its potential, unemployment is low,
production is high and inflation is under control.
The difference between potential and actual GDP is called the GDP Gap.
GNP (Gross National Product): is the total output produced with labor and capital
owned by residents of a country during a year, while GDP is the output produced
with labor and capital located inside the country.
GDP per capita: the portion of GDP that goes to each resident. It gives an idea about
the standard of living in each country.
GDP
GDP / capita =
Population
Typically, economists divide business cycles into 2 main phases: recession and expansion.
Peaks and troughs mark the turning points of the cycles.
Note that the pattern of the cycles is irregular. No 2 business cycles (expansion – peak –
recession – trough) are quite the same. The cycles are like mountain ranges, with
different levels of hills and valleys. Some valleys are very deep and broad (big decrease
and for a long period), as in the Great Depression; others are shallow and narrow, as was
that of 1970.
While business cycles are not identical twins, they often have a familial similarity. If a
reliable economic forecaster announces that a recession is about to arrive, are there any
typical phenomena that you should expect to accompany the recession?
The demand for labor falls – first seen in a drop in the average workweek,
followed by layoffs and higher unemployment.
As output falls, inflation shows. As demand for crude materials declines, their
prices tumble. Wages and prices of services are unlikely to decline, but they tend
to rise less rapidly in economic downturns.