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1 - recession
2 upturn
3 boom
National output
4 downturn / slump
3
2
3
4
2
Time
National output
Potential output
3
2
3
4
2
Time
4
Actual
output
Trend
output
Positive
Output
Gap
Negative Output
Gap
Time
Actual
output
Output Gap
BOP disequilibrium
Constraints on growth
Government instability
Incompetent,
less FDI
Fiscal deficit = less spending to encourage growth
More extreme when political tension, wars etc
Constraints on growth
of skilled labour
Low birth rates falling labour supply
Immigration
Brain drain
External constraints
Trade
Structure:
Define (2)
Diagram (4)
3 benefits (3 x 4)
3 costs (3 x 4)