The economic cycle - unit 1

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  • Economic Growth
    • measured by GDP (gross domestic product)
      • GDP is the amount of goods and services in the economy
    • caused of economic growth
      • more investment
      • improved training, machinery, productivity
      • anything that increases the output of goods or services
    • drawbacks of economic growth
      • increased production = increased pollution
      • exhaustion of resorces
      • benefits only effect the rich - poor stay poor
    • benefits of economic growth
      • increase in general income
      • more jobs
      • increased output
      • consumers have more choice
      • higher standards of living
  • THE ECONOMIC CYCLE
    • Economic Growth
      • measured by GDP (gross domestic product)
        • GDP is the amount of goods and services in the economy
      • caused of economic growth
        • more investment
        • improved training, machinery, productivity
        • anything that increases the output of goods or services
      • drawbacks of economic growth
        • increased production = increased pollution
        • exhaustion of resorces
        • benefits only effect the rich - poor stay poor
      • benefits of economic growth
        • increase in general income
        • more jobs
        • increased output
        • consumers have more choice
        • higher standards of living
    • Slump
      • a period of decrease in economic growth
        • consumers lose confidence
        • spending decreases
        • investment decreases
        • demand decreases
        • inflation occurs
    • Recession
      • a sustained fall in GDP over two consecutive quarters
      • high unemployment
      • low disposable incomes
      • high gov spending
      • low retail sales
    • Recovery
      • increase in consumer confidence
      • disposable incomes start to rise
      • demand increases
    • Boom
      • low unemployment
      • high disposable income
      • Inflation
      • high output
      • low gov spending
    • What is done?
      • curbing the boom:
        • increase interest rates
        • increase taxes and cut gov spending
      • curbing the recession
        • reduce interest rates
        • cut taxes and increase gov spending
        • quantitative easing: printing additional money
      • economic objectives
        • inflation should be low/stable - at 2% pa
        • exchange rates should be stable
      • why does recession occur?
        • rising costs slow investments + spending
        • rising interest rates deter spending
        • inflation  = falling real incomes

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