Economic Growth

Discuss how various national economic indicators relate to economic growth.

1 Explain the shapes of the aggregate demand and supply curves and how they interact to

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determine real gross domestic product (GDP) and the price level for a nation.

2 Describe the differences between classical and Keynesian theories.

3 Explain the two ways of calculating GDP.

When GDP is used to compare changes in the value of output over time, we can also draw conclusions regarding the status of the economy. Take special note of the terms expansion, contraction, depression, and recession as they relate to GDP. Expansions occur when an economy has rising output, employment, income, and other aggregate measures. The reading suggests that a contraction is just the opposite (falling output, employment, income, and other aggregate measures). Dramatic contractions that last a long period of time are called depressions.