Understanding Economic Growth and Business Cycles
Explore the concept of business cycles, economic expansion and recession, the impact on unemployment rate, long-run economic growth, potential GDP, the Rule of 70, determinants of long-run growth, and more in this insightful discussion on economic growth and business cycles.
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ECO 1 ECONOMIC GROWTH AND BUSINESS CYCLES Erkmen GirayASLIM (erkmengirayaslim.com) e-mail: era314@Lehigh.edu 11/13/2015 Department of Economics Lehigh University
BACKGROUND INFORMATION How can we define business cycles? Economic expansion and recession.
LONG-RUN ECONOMIC GROWTH The process by which rising productivity increases the average standard of living.
POTENTIAL GDP The level of real GDP attained when all firms are producing at capacity. Operating at normal hours and using a normal workforce.
RULE OF 70 70 = Number of years double to Growth rate If real GDP per capita growth rate is 5 percent per year, then it will take 70/5 = 14 years for real GDP per capita to double . Proof: (Hint: Use ln2 = 0.69) G(t) = G(0) x ert
DETERMINANTS OF LONG-RUN GROWTH Labor productivity. Increase in capital. Technological change. Y = F(A, K, L)
