Economic Fluctuation

Fluctuation

• It is the deviation of economic growth from the long run.

• It can grow faster than the trend(expansion) or grow slower(recession).

Business cycle

• It is the variance of expansion and recession that occur in a business.

Aggregate supply

• It is the amount of outputs firm are willing to produce at a given point of price.

• In the long run. It's curve is a vertical line in Qo. While in the short run, it is a upward slope.

Aggregate demand

• It is the amount of outputs consumer is willing to purchase at a given point of price.

• It is a downward slope in both long and short run.

Market equilibrium

• A.S=A.D

• Shifting the AD or AS slope can create a new equilibrium level in the short run, however in the long run it will always return to the Qo but with a different Price level.

Okun's law

• It was propose by Arthus Okun which shows the inverse relationship between the GDP and unemployment.

• It only occur in an economy with cyclical unemployment.

• It says that at every 1% drop in unemployment, the economy loses 2% of it's GDP. (V.V.)

Formula

• Y-Y*/Y*= c(u-u*)

• ∆Y= k-c(∆u)