Topic 7: Business Cycle

dotted line- full employment

point of GDP growth before contraction occurs. Do not know you are there until you are out.

Lowest point of GDP concentration before expansion. Do not know you are there until you leave.

6 month period of decline in Real GDP

Time period where real GDP is expanding

When actual employment is greater than full employment.

• Inflationary Gap

• High prices (inflation) and low unemployment

When actual output is less than potential output.

• Recessionary gap

• High unemployment and lower prices]

inside point on the PPC

4-6% unemployment in the US

frictional+structural unemployment