Growth and the Business Cycle (or Trade Cycle). Growth and the business cycle Actual and potential...

Growth and the Growth and the Business Cycle Business Cycle (or Trade Cycle)(or Trade Cycle)

Growth and the business cycleGrowth and the business cycle

Actual and potential economic growth

Actual and potential economic growth

v

x

y

O

Making fuller use of resourcesMaking fuller use of resourcesMaking fuller use of resourcesMaking fuller use of resourcesF

oo

d

Clothing

Production insidethe production

possibility curve

O

Growth in potential outputGrowth in potential outputGrowth in potential outputGrowth in potential outputF

oo

d

Clothing

Now

O

Fo

od

Clothing

Now

Growth in potential outputGrowth in potential outputGrowth in potential outputGrowth in potential output

5 years’ time

O

Fo

od

Clothing

Growth in potential and actual outputGrowth in potential and actual outputGrowth in potential and actual outputGrowth in potential and actual output

O

Fo

od

Clothing

Growth in potential and actual outputGrowth in potential and actual outputGrowth in potential and actual outputGrowth in potential and actual output

x

y


The business cycleThe business cycle

O

Nat

iona

l out

put

Time

Potential output

1

2

3

4

1

2

34Actualoutput

The business cycle

O

Nat

iona

l out

put

Time

Potential output

Actualoutput

Trendoutput

The business cycle


The business cyclein practice

The business cyclein practice

-3

-2

-1

0

1

2

3

4

5

6

7

8

9

10

1970 1975 1980 1985 1990 1995 2000

Ann

ual g

row

th r

ate

(%)

UK

Growth rates in selected industrial countries

-3

-2

-1

0

1

2

3

4

5

6

7

8

9

10

1970 1975 1980 1985 1990 1995 2000

Ann

ual g

row

th r

ate

(%)

UK

Growth rates in selected industrial countriesGrowth rates in selected industrial countriesGrowth rates in selected industrial countriesGrowth rates in selected industrial countries

-3

-2

-1

0

1

2

3

4

5

6

7

8

9

10

1970 1975 1980 1985 1990 1995 2000

Ann

ual g

row

th r

ate

(%)

UK

France


-3

-2

-1

0

1

2

3

4

5

6

7

8

9

10

1970 1975 1980 1985 1990 1995 2000

Ann

ual g

row

th r

ate

(%)

UK

France

Germany


-3

-2

-1

0

1

2

3

4

5

6

7

8

9

10

1970 1975 1980 1985 1990 1995 2000

Ann

ual g

row

th r

ate

(%)

UK

France USA

Germany


-3

-2

-1

0

1

2

3

4

5

6

7

8

9

10

1970 1975 1980 1985 1990 1995 2000

Ann

ual g

row

th r

ate

(%)

UK

France USA

GermanyJapan


Growth and the Business Cycle (or Trade Cycle). Growth and the business cycle Actual and potential...

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Transcript of Growth and the Business Cycle (or Trade Cycle). Growth and the business cycle Actual and potential...