The national economy fluctuates resulting in periods of boom and bust.
A recession is a 6 month period of decline in output, income, employment and trade. Wars often pull countries out of recession periods.
Why does economy fluctuate?
- Retailers and producers send misleading information about consumer demand
- Advances in technology, productivity, or resources
- Outside influences (war, supply, shocks, panic)
Who cares?
- Macroeconomics measures these fluctuations and guides policies to keep the economy stable
- The government has the responsibility to:
- promote long-term growth
- prevent unemployment (resulting from a bust)
- prevent inflation (resulting from a boom)
Economic Growth
- An increase in real GDP overtime
- An increase in real GDP per capita over time (usually used to determine standard of living)
Why is economic growth the goal of every society?
- Provides better goods and services
- Increase wages and standard of living
- Allows more leisure time
- Economy can better meet wants