Work through the list without notes. If you cannot do a statement, follow its link, then come back. Guide = study guide; Practice = practice questions.
Understanding
- I can describe a business cycle as short-run fluctuations in real output and employment, caused by changes in aggregate demand and/or aggregate supply. (Guide: “Output does not grow smoothly”; Practice Q7(d))
- I can name the two phases (recession, expansion) and the two turning points (peak, trough) and put them in order. (Guide: “Phases and turning points”; Practice Q1)
- I can define potential output as full-employment output, where unemployment equals the natural rate. (Guide: “Potential output and the output gap”; Practice Q7(c))
- I can explain why slower but positive growth is still an expansion. (Guide: “Common misconceptions”; Practice Q4)
Calculation and graphs
- I can identify peaks, troughs and recession quarters from a table of real GDP. (Guide: Worked example 1; Practice Q5)
- I can calculate an output gap in money and as a percentage of potential output, with the correct sign. (Guide: Worked example 1(d); Practice Q3, Q7(a))
- I can calculate cyclical unemployment from the unemployment rate and the natural rate. (Guide: Worked example 2; Practice Q7(b))
- I can read phases, turning points and the sign of the output gap from a business cycle graph. (Guide: Figure 1 and “Reading a business cycle graph”; Practice Q2)
Reasoning
- I can link a negative output gap to unemployment above the natural rate, and a positive gap to unemployment below it. (Guide: Worked example 2(b); Practice Q2, Q7(c))
- I can explain why nominal GDP can hide a recession and use real GDP to find one. (Practice Q6)
All ticked? Move on to Unit 3, Aggregate Demand (AD), or return to the course roadmap.