Gdp Principles of Economics

What is the relationship between GDP and the business cycle?

Gross Domestic Product (GDP): The market value of all final goods and services produced within a country in a given period of time.

Business Cycle: The fluctuations in production or economic activity over several months or years. There are four different kinds of business cycles.

1. Slump: A time period where equating balance of the equilibrium of the economy goes down due to something causing a drop in the output ad growth of the economy

2. Recession: Is what follows after a slump in the economy. This is where the level of production drops in the level of total goods and services

3. Recovery: Is the process when the economy starts to recover and comes back to a normal status.

4. Boom: A period of time where there is a raise in the output and production volumes of products.

During each different kind of business cycle the GDP changes according to how the output and production of the economy. During a slump period The GDP starts to drop, and during a recession period the GDP rapidly drops, during a recovery period there will be a slow but steady raise in the GDP and finally during the boom period the GDP will increases substantially.

How can you use information about the business cycle when making a decision about a large purchase?

When making a decision to make a large purchase like a maybe a new home, information on business cycle can give leads on things such a where the economy stands at the time. Interests’ rates, inflation rates, unemployment rates and employment rates can all be determined from a business cycle. Knowing the proper information on interests’ rates and inflation rates can save you a lot of money when it comes to making big purchases. So using the information about the business cycle can educate and inform where it is very important.

What is inflation?

Inflation: A rise in the overall level of goods and services in the economy over the...