The business cycle
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The Business Cycle. The Business Cycle. Four things that affect the Business Cycle. 1. business investment 2 . interest rates and credit 3. consumer expectations 4. external shocks. Definitions. Real GDP per capita - Real GDP divided by the total population

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The Business Cycle

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The business cycle

The Business Cycle


The business cycle1

The Business Cycle


Four things that affect the business cycle

Four things that affect the Business Cycle

  • 1. business investment

  • 2. interest rates and credit

  • 3. consumer expectations

  • 4. external shocks


Definitions

Definitions

  • Real GDP per capita - Real GDP divided by the total population

  • labor productivity - the amount of output produced per worker

  • Saving – income that is not used for consumption

  • savings rate – the percentage of money income that is saved


American savings rate

American Savings Rate


Capital deepening

Capital Deepening

  • capital deepening - process of increasing the amount of capital per worker

  • It’s been found that capital deepening increases GDP growth.

  • Higher savings rates leads to higher investment which can lead to capital deepening


Three things that can affect capital deepening

Three things that can affect capital deepening

  • population

  • government taxes -

    bad: used to finance a war, pork spending

    good: used to invest in infrastructure

  • Foreign imports good or bad?

    Good: if the imports are used as investments or improvements


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