1. In one time period the growth rate of GDP of a country is recorded as 3,4% against a trend growth rate of output of 2,8%. In the next two time periods, the growth rate of GDP is recorded as 2,8% and 2% respectively. Is the country experiencing a recession? Explain.
2. Firms experience a rise in stocks. Explain why this might have occurred and what you expect firms' response to this event might be and how this might affect output.
3. Why might household and firm's confidence and expectations change leading to deviations in output from the trend? Is there any way in which changes in confidence can be measured to provide an indicator of changes in economic activity?
4. There is a fall in the price level which workers do not anticipate. Explain what effect such a scenario will have on the output.