Booklet 2- economic performance

• Boom

  High unsustainable growth leading to inflation and worsening deficit on the balance of trade
• Downturn

  Rate of growth slows
• Recession

  2 quarters of negative growth in GDP
• Recovery

  Upturn of economic growth
• Positive output gap

  When actual output is above potential GDP
• Governments macro-economic objectives:

  1. trade
  2. inflation
  3. growth
  4. employment
  5. redistribution of income
  6. sustainability
• Real gdp: takes into account inflation
• Deflation

  A sustained decrease in the overall price level. Inflation is negative
• Negative output gap

  If the actual output is below the potential GDP
• Spare capacity

  When a firm isn’t producing at full potential efficiency. Not making full use of land labour capital and enterprise
• Productivity

  Measure of the relationship between inputs into production process and resultant output
• GDP

  Measure of a country’s economic activity (all goods/services produced in a year)
• Economic shock

  Any unexpected and significant event that disrupts the economy’s functioning