Economic Seasonal Terms

Economic Seasonal Terms

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Economic Seasonal Terms

Inflation denotes an increment the price of good/services within an economy equated to lose of money’s purchasing power where a unit of money buys fewer goods. Stagflation is used to refer to a situation where inflation is coupled with a stagnant economy in terms of growth and productivity a phenomena conventionally opposed by economic theorists such as Keynes. In stagflation, the holistic price level increases while production and employment rate falls. Economic recession describes a situation where the macro-economic aspects of an economy decline consequently a nation’s economic activity. These factors include employment and investment rates as well as GDP. Recession results to depression when prolonged in duration as well as economic contractions uniquely referring to decreasing GDP over a long duration of time (Chamberlin, 2006). In contrast, expansion is a period typified by a continual increment in a country’s output and is generally longer in duration than a contraction.

Depending on the level of utilization of a nation’s resources and economic level, the aforementioned economic terms interact and are characteristic of an economic business cycle. The cycle constitutes of two major phases, the contraction and expansion. Developing economies experience sharper fluctuations given the unused economic resources while developed economies are characterized by moderate fluctuations in economic activity. During an economic contraction, recession is evident where a nations’ output decreases. This phase is characterized by decreasing economic output, investment rate and aggregate demand consequently supply. As previously indicated, if the contraction/recession prolongs then an economic depression is experienced. The second phase is the expansion or boom phase where there is prolific increase in the nation’s economic activity illustrated by increased investment, aggregate demand as well as supply and the general economic output. More of the economic potential in respect to employment and economic resources is put to use (Huerta et al. 2009).

References

Chamberlin, G., & Yueh, L. (2006). Macroeconomics. London: Thomson Learning.

Huerta, . S. J., & Stroup, M. A. (2009). Money, bank credit, and economic cycles. Auburn, Ala: Ludwig von Mises Institute.