Business Cycle Facts: How GDP moves over time

Created by: Lina Jovaisaite
Created on: 03-05-13 15:05

Why do GDP graphs use 'per capita' and what does that mean?

Per capita means per person: the total GDP for a period is divided by the population for that period. This is done in order to eliminate false assumptions - GDP might increase due to an increase in population; not a reflection on welfare

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What is price-invariance? How is it achieved? Cons?

Price- invariant GDP data is achieved through using relative prices rather than those of the time. A 1900 - 2000 graph will use the prices of year 2000 to examine the changes in GDP over time. Con: the reliance of the interpreted price

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What are filters and what do they show? Discuss the two main types

Filters are lines of best fit, they show the trend of data. A straight line is easy to apply, but it assumes that the long-run growth rate is the same (not entirely correct). The HP filter is better as it is more closely linked to the data

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Discuss the axioms of a % deviation graph

The flat line represents the average growth rate (2.1% US). The peaks and troughs show the percentage deviations from trend in GDP. They are often exceptionally volatile which characterizes GDP

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Discuss Business Cycle Variations in GDP

There are no real patterns and consistencies. The only regularity is short term persistence, when the GDP moves to +ve or -ve, it tends to stay there for an average of 8 periods

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Other cards in this set

Card 2

Front

What is price-invariance? How is it achieved? Cons?

Back

Card 3

Front

What are filters and what do they show? Discuss the two main types

Back

Card 4

Front

Discuss the axioms of a % deviation graph

Back

Card 5

Front

Discuss Business Cycle Variations in GDP

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Business Cycle Facts: How GDP moves over time