Trade Cycle

• Boom - A period when the rate of growth of real GDP is fast and higher than the long term trend
• Business cycle - Short run fluctuations of national output (real GDP) around its long term trend.
• National income - Everything produced, earned and spent in a country.
• Slowdown - A weakening of the rate of growth. Real GDP is still rising but increasing at a slower rate.
• Recession - A period of at least 6 months when an economy suffers a fall in output. A contraction in output, employment, investment and confidence.
• Recovery - A phase of the cycle, after a recession, during which real GDP starts to increase and unemployment begins to fall.
• Depression - A prolonged downturn in the economy and where a nations GDP falls by at least 10%.
• Problems in forecasting real GDP growth:

  1. Uncertain business confidence levels
  2. Rate of business job creation is hard to forecast
  3. Uncertain reaction to policy changes
  4. Fluctuations in exchange rates
  5. External events - volatile gas and oil prices