Macroeconomics

Table of Contents

1. Topic pack - Macroeconomics - introduction
2. 2.1 The level of overall economic activity (notes)
   1. Overall economic activity - introduction
   2. The circular flow of income model (1)
   3. Circular flow - two sector closed
   4. Circular flow - two sector open
   5. Circular flow - three sector open
   6. Circular flow - government
   7. The circular flow of income model (2)
   8. Circular flow - a summary
   9. Some mathematics
   10. Measures of economic activity
   11. Examining the three methods of calculating national income
   12. What is GDP? (video)
   13. Different national income measures
   14. Real v money data
   15. Current and constant prices
   16. Using index numbers
   17. Total and per capita
   18. Case study - rapid economic growth
   19. Using national income data
   20. Purchasing power of GDP
   21. Alternative measures of GDP
   22. Case Study
   23. Short term fluctuations and long term trends
   24. The business cycle in history
3. 2.1 The level of overall economic activity (questions)
4. Section 2.2 Aggregate demand and supply (notes)
5. Section 2.2 Aggregate demand and supply (simulations and activities)
6. 2.2 Aggregate Demand and Aggregate Supply (questions)
7. 2.3 Macroeconomic objectives (notes)
8. Low Unemployment
9. 2.3 Macroeconomic objectives (questions)
10. 2.4 Fiscal policy (notes)
11. 2.4 Fiscal policy (questions)
12. 2.5 Monetary policy (notes)
13. 2.5 Monetary Policy (questions)
14. Section 2.6 Supply-side policies (notes)
15. 2.6 Supply-side policies (questions)
16. Print View

Business Cycle - Short-term fluctuations and long-term trend

Explain, using a business cycle diagram, that economies typically tend to go through a
cyclical pattern characterized by the phases of the business cycle. See interactive diagram below

If you would prefer to view this interaction in a new web window, then please follow the link below:

• The business cycle

You need to be able to:

Explain the long-term growth trend in the business cycle diagram as the potential output of the economy.

Any economy has a given set of Factors of Production (Quantity and Quality) therefore there is a maximum GDP level that can be produced by those Factors of Production: This is often called the potential output of the economy and it shows the long term growth rate of the economy.

(The potential output can be described using a Production Possibility Curve or on and Aggregate Demand/Aggregate Supply diagram - you will come across this shortly))

You need to be able to:

Distinguish between a decrease in GDP and a decrease in GDP growth.

In China the growth rate fell from 10% to 7% - does this mean that GDP fell during that time?