2.5.3: Trade (Business) Cycle

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