Econ Unit 3 Inflationary/Recessionary Gap

Capital Stock

Machinery and tools purchased by businesses that increase output.
*PPC shifts outward since producers can make more

An increase in consumption or government or economic growth

only investment causes growth since firms increased heir capital stock.

If consumer spending increases, what will happen in the short/long run?

In long run, wages/cost increase

Inflationary Gap

Output is high and unemployment is less than the Natural Rate of Unemployment.

Recessionary Gap

Output is low and unemployment is more than the Natural Rate of Unemployment.

Stagflation

a period of slow economic growth and high unemployment while prices rise

Still considered recessionary Gap.