ECON 1BB3 Lecture Notes - Lecture 14: Stock Market, Aggregate Supply, Aggregate Demand
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9 Jan 2016
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ECON 1BB3 Full Course Notes
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Business cycle = recession + expansion (boom) Business cycles are irregular and unpredictable ie shocks. Variables fluctuate together gdp and employment rate, gdp and price level. Technical definition two consecutive quarters of declining real gdp (ie 6 months declining) Moving from peak to trough in a stylized business cycle diagram. Slow growth from trough to peak, peak to trough is recession. Long run aggregate supply, short run aggregate supply, aggregate demand. Equilibrium is intersection between ad and sras curve. If this point also coincides with lras curve then economy is in long run equilibrium. Stock market book value of wealth goes up this increases consumption spending. At point b, price level is higher, real gdp is higher- firms are producing more services/goods and employment goes up. Oil plays a role in production and transport. Price level goes up, gdp goes down, unemployment goes up. This event is called stagflation stag stagnant economy is in recession: flation- inflation.