Economic Trade Cycle
This shows how economic growth can fluctuate within different phases, for example:
- i) a boom (which is high growth causing inflation,
ii) Peak (top of trade cycle
iii) Downturn or Recession ( fall in economic growth)
iv) Recovery (upturn of economic growth)
· Some economists suggest that there is a political business cycle, this is when politicians try to have a boom before an election
· Since the Bank of England set Monetary policy in 1997 the trade cycle has been more stable in the UK
Output Gap
· If potential output grows faster than actual output there will be an increase in spare capacity, the shortfall between actual and potential output increase.
· With fast economic growth and increases in AD then the output gap gets smaller
· The Long Run Trend Rate of Economic Growth:
This refers to the average sustainable rate of economic growth in an economy. For example in the UK this is about 2.5%.
· Therefore this is the rate of increase in LRAS and the productive capacity of the economy
Essays and Revision Notes on Economic Growth
- Economic Growth Notes
- Benefits of Economic Growth
- Causes of Economic Growth
- Causes of Recessions
- Costs of Economic Growth
- The Great Depression 1929-1939
- Recessions
- Trade Cycle
- UK Recession 1980-81
- UK Recession 1991-92
- Supply Side Policies
- Supply Side Policies in the UK
- Aggregate Demand
