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INFLATIONARY GAP, KEYNESIAN MODEL: The difference between equilibrium aggregate production achieved in the Keynesian model and full-employment aggregate production that occurs when equilibrium aggregate production is greater than full-employment aggregate production. An inflationary gap, also termed an expansionary gap, is associated with a business-cycle expansion. The prescribed Keynesian remedy for an inflationary gap is contractionary fiscal policy. This is one of two alternative output gaps that can occur when equilibrium generates production that differs from full employment. The other is a recessionary gap.
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Lesson 12: Business Cycles | Unit 4: Causes
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Page: 20 of 26
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Re-election seeking politicians is a second explanation for business cycles. Four propositions lay the foundation:- An elected leader remains an elected leader only if re-elected.
- Government can influence economic activity through stabilization policies. Fiscal policy, lower taxes and more spending, can trigger an expansion. The opposite can cause a contraction.
- Voters re-elect current leader during good times and elect new leaders during bad times. They vote their pocketbooks.
- Elected leaders know how this process works and give us the recipe for a politically induced business cycles.
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DEMAND-DRIVEN BUSINESS CYCLES Business-cycle instability caused by changes in one or more of the four aggregate demand expenditures on gross domestic production--consumption expenditures, investment expenditures, government purchases, and net exports. This is one of two basic types of business cycles--the other being supply-driven business cycles. Demand-driven business cycles tend to be the more common of the two types.
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ORANGE REBELOON
[What's This?]
Today, you are likely to spend a great deal of time lost in your local discount super center wanting to buy either car battery jumper cables or a dozen high trajectory optic orange golf balls. Be on the lookout for letters from the Internal Revenue Service.
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Junk bonds are so called because they have a better than 50% chance of default, carrying a Standard & Poor's rating of CC or lower.
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"The road to success is always under construction. " -- Lily Tomlin, Actress
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MFC
Marginal Factor Cost
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