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The cycle can be illustrated graphically as shown below.
Potential output is the total production of output that is possible when all the factors of production are fully and efficiently employed. For example when the unemployment rate is about 5% since a 0% unemployment rate cannot be achieved in real economic conditions. Actual output is the real physical output that has actually been produced in the economy. Output gap is therefore expressed as the difference between the potential output and the real output. Large output gap is an indication of increased unemployment rate. The neo-classical theory uses output gap to explain business cycle.
Y=c[y-t(y)]+i(r)+g dy=c’(dy-I’dy)+I’dr =c’dy-c’I’dy+I’dr dy-c’(1-i’)dy=I’dr dy(1-c’(1-i’)d=I’dr dy=I’dr/1-c’(1-i’) dy/dr=I’/1-c’(1-i’)
The expenditure multiplier explains the amount o change in output due to a unit change in government expenditure while tax multiplier explains the amount of change in output due to a unit change in tax rate.
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[872,914+ 205,063+ 327,682+ 386,648- 418,671] million = ? 1,373,636 million ii. The growth of GDP from 2008 to 2009 is [(1,373,636-1,408,839)/ 1,408,839]*100 = -2.5% (approximately) iii. The UK is running trade deficit in both of the years as exports are lower than imports in 2008 as well as in 2009.
The depression caused the world’s macroeconomists to alter their theories in order to make allowances for paradigm shifts resulting from changes in interest rates and money supply. The original macroeconomic equilibrium takes place when Aggregate Supply of Funding = Aggregate Planned Expenditure = Gross Domestic Product.
According to economists, market power can be referred to the ability of an organization to hike the price of a commodity or a service over marginal cost in a manner resulting to profitability (Degraba 2000). Organizations, which have market power, are mostly referred to as price takers or markers.
However, emerging countries, which were considered vulnerable are exhibiting a remarkable resiliency, and growth seems to point to the pre-2008 breakout levels. In essence, the performance exhibited by the emerging countries is viewed as a significant engine of expansion in regard to the present global economy (Lachman 64).
Earlier, rehabilitation had been defined by the World Health Organization (WHO) as "a process aimed at enabling persons with disabilities to reach and maintain their optimal functional levels." In May 2001, however, WHO adopted the International Classification of Functioning, Disability and Health where the new classification has modified the concept of disability to recognise that personal and environmental factors directly influence the experience of people with disability.
GDP measures specifically the total income and the total production of a nation. GDP is calculated by combining consumption, investment, government spending and net exports of a nation. It is important to note that GDP counts only
For Greece, the economic situation remained concealed until the mid-2008 when there was a dramatic increase in public debt as observed in numerous advanced economies. Currently, the financial tragedy in Greek brings out three primary
b. To be able to restore the economy to full employment; the government must find ways that it promotes local businesses. When local businesses experience a high demand from their products they increase their labor