Business Cycle

6 flashcards · Economics · by Addaneye

1. What is a recession?

   When there has been two or more consecutive quarters of negative economic growth

2. What is a negative output gap?

   When actual GDP is below potential trend GDP. The economy is not using its resources efficiently

3. What is a positive output gap?

   When actual GDP is above potential trend GDP. The economy is producing above its potential.

4. Why would a positive output gap close?

   Operating at above the potential GDP is not sustainable

5. 5 characteristics of a boom

   high animal spirits high economic growth demand pull inflation low unemployment improved budget

6. 5 characteristics of a bust (recession)

   low animal spirits low economic growth low inflation/deflation high unemployment worsened budget