A recession is a decline in Question 1 options: the inflation rate that lasts six months or longer. the unemployment rate that lasts six months or longer. real GDP that lasts six months or longer. potential GDP that lasts six months or longer.
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A number of macroeconomic variables decline during recessions. One of these variables is the GDP. 1. What other variables, besides real GDP, tend to decline during recessions? Given the definition of real GDP and its components, explain the declines in these economic variables which are to be expected. 2. Empirical studies indicate that the long-run trend in real GDP of the USA has an upward trend. How is this possible given business cycles and macroeconomic fluctuations? What factors explain the upward trend in spite of the cycles?
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