(A Level) Output gaps and the business cycle

Learning objectives

Distinguish actual from potential growth in national output and show each on PPC and AD/AS diagrams

Define positive and negative output gaps and explain their links to inflation and unemployment

Describe the phases of the business (trade) cycle and explain its causes, including multiplier–accelerator interaction and external shocks

Explain how automatic stabilisers reduce fluctuations over the business cycle

Evaluate policies to promote economic growth and how effective they are