EC140 Lecture 4: Lecture 4 - January 16, 2019
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Document Summary
Years are divided into quarters a recession is a period of sustained negative output growth. Conventionally (for example in the 2015 balanced budget legislation a recession is a 2 consecutive quarters of negative growth. But more generally it is a period of a widespread (many industries) fall in output with an increase in the unemployment rate. If output is at potential output (earlier definition) at potential output all unemployment is frictional or structural. The bank of canada and many others try very hard to estimate potential output (it is not an easy job) Diagram 3 of the business cycle update of the unemployment rate we think of. Average unemployment as the total of frictional and structural with the extra as cyclical. A key question in macroeconomics on which there is no clear agreement: Canada participates heavily in the international economy: we sell our goods to foreigners and we buy lots of goods from foreigners.
