1.The financial system – either financial markets or financial intermediaries – provides security to savers warranting that their funds are fully insured against loss. 2. Potential GDP is the level of GDP when all firms produce at capacity. Potential GDP remains constant over time. 3. The high point of economic activity is called a peak. The low point of economic activity is called a trough. The period between a peak and a trough is called a recession while the period between a trough and a peak is called acceleration. 4. A larger multiplier means that small changes in spending lead to large changes in GDP and thus recessions would be more severe.

1.The financial system – either financial markets or financial intermediaries – provides security to savers warranting that their funds are fully insured against loss. 2. Potential GDP is the level of GDP when all firms produce at capacity. Potential GDP remains constant over time. 3. The high point of economic activity is called a peak. The low point of economic activity is called a trough. The period between a peak and a trough is called a recession while the period between a trough and a peak is called acceleration. 4. A larger multiplier means that small changes in spending lead to large changes in GDP and thus recessions would be more severe.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter23: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 1QR

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