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Theme 2
2.5: Economic Growth
2.5.3: Trade (Business) Cycle
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Created by
Kendrick Lamar
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Cards (21)
Trade cycle: Fluctuation of
economic
activity over time between expansion and
contraction
Boom: A period when rate of growth of
real
GDP
is higher than the long run trend
Slowdown: Rate of growth of
real
GDP
is weakening, but still rising
Recession: A period of
6
months or more when an economy suffers a fall in
real
GDP
Depression: A recession where real
GDP
has fallen by at least
10
%
Recovery: A phase after recession when real GDP begins to increase
Cause of economic slowdown:
Tightening
of
fiscal policy
Cause of economic slowdown: Increase in
interest rates
Cause of economic slowdown:
Slowdown
in
global
economic growth
Cause of economic slowdown: Shock in the economy
Characteristic of a recession:
Fall
in
real GDP
Characteristic of a recession: Increase in
unemployment
Characteristic of a recession:
Disinflation
Economic
shock
: Unexpected event that leads to a sudden and significant effect on indicators like inflation, unemployment and economic growth
Demand side shock
: A
sudden
change in AD
Supply
side shock
: A sudden change in
AS
Positive shock
: A shock that
boosts
the economy
Negative shock: A shock that causes a
recession
or increase in
unemployment
or inflation
External shock
: Shock coming from
global
events
Internal shock: Shock coming from
within
an economy
Shocks can be worsened by the
multiplier effect