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15 Cards in this Set
- Front
- Back
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Actual growth |
Economic growth as measured by recorded changes in real GDP over time. |
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Boom or peak |
Period of time when the economy is growing strongly and is operating above its productive potential. |
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Demand-side shock |
A sudden and large impact on aggregate demand. |
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Depression or slump |
A period of the trade cycle when there is a particularly deep and long fall in output. |
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Downturn |
A period of the trade cycle when either economic growth or GDP itself is falling. |
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Economic growth |
A rise in output in an economy which can be either actual or potential growth. |
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Economic recovery |
The movement back from where the economy is operating below its productive potential to a point where it is at its productive potential. |
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Export-led growth |
A rise in aggregate demand caused by a rise in exports. |
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Hysteresis |
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. |
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Output gap |
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. |
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Potential growth |
Economic growth as measured by the changes in the productive potential of the economy over time. |
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Recession |
A period of the trade cycle when output or growth in output falls. The technical definition now used by the UK government is that a recession occurs when growth in output is negative for two successive quarters. |
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Spare capacity |
For a whole economy, this exists when long run aggregate supply is greater than aggregate demand and so there is a negative output gap. |
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Supply-side shock |
A sudden and large impact on aggregate supply. |
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Trade, business or economic cycle |
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 above its productive potential. |
