Separation of growth and fluctuation, Macroeconomics

Assignment Help:

Separation of growth and fluctuation

It is very useful to separate the evolution of a variable which grows over time into a trend and fluctuations around the trend. The graphs below demonstrate such a separation for real GDP. 

1052_Separation of growth and fluctuation.png

Figure: Growth and the fluctuation around the trend

The left diagram demonstrates a stylized graph of real GDP over time. It illustrates the two significant characteristics in real GDP. GDP fluctuates over time and GDP grows over time - at least over a longer period of time. The left graph is the sum of middle graph and right graph. 

The middle graph illustrates the trend in GDP. Trend signifies the second characteristic of GDP - the fact that GDP grows over time. Right graph demonstrates the fluctuations around the trend (cycles) of GDP. These fluctuations around the trend signify the first property of GDP. 

In macroeconomics it's common to study trends and cycles separately. Purpose of growth theory is to investigate the trend whereas most of macroeconomics apart from growth theory is about the cycles. The trend is about the very long run perspective of the economy whereas cycles are about the short and medium run. The rest of this is all about cycles and not at all about trends. Consequently when you think of GDP in the remaining chapters, you must think of GDP as in the right-hand graph: GDP has cycles however no trend.


Related Discussions:- Separation of growth and fluctuation

Define the term - productivity, Define the term - Productivity Producti...

Define the term - Productivity Productivity is the concept which measures how outputs can be maximised from given inputs. In factories labour productivity is normally calculate

Rice production is land intensive, If rice production is land intensive and...

If rice production is land intensive and computer production is labor intensive, though both good require some land and labor, the two-good production possibilities frontier will c

Gpd., the whole explanation of dpd

the whole explanation of dpd

Lewis model., applicability of the lewis model in developing countries

applicability of the lewis model in developing countries

Public economics., Critically examine the statement that privatization can ...

Critically examine the statement that privatization can always decentralize economic power.

Governors of the federal reserve system, You should now find a press releas...

You should now find a press release from the Board of Governors of the Federal Reserve System, dated December 16, 2009, which discusses the decisions of the Federal Open Market Com

Outsourcing to the private sector help reduce the deficit, I need some help...

I need some help organizing an outline for a 5000-6000 word paper. What I am asking for is ideas on how to best organize this topic: "Should Government do it all? Can outsourcing t

Price results in the efficient quantity, The Price ceiling is the law that ...

The Price ceiling is the law that sets a maximum price below the equilibrium market price, but a price floor is the law that sets a maximum price above the market equilibrium price

frame work, Hello sir, madam... I am hassan PHD student. I''m lost to get...

Hello sir, madam... I am hassan PHD student. I''m lost to get a good frame work of my thesis about e government and economic growth. and I need to know how to measure the variable

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd