Question

Over a period of 30 or 40 years, what is your estimate of how much of the change in economic output is due to the growth of potential GDP and how much is due to episodes of recession and economic upswings?

Answer 1

Over a period of 30 or 40 years if there is increase in real potential GDP from year to year without any fluctuations than the economic output will also increase every year thus making the economic growth rate in a positive upward direction which will help for the country to have a stable economy.

If there are episodes of recessions will have negative impact where there will be declines in economic output which can be seen mainly on real GDP where it declines and the government should take steps to overcomes recession as it is like a downfall of growth rate, economy and the country will face economic crisis in that period until again it reaches a normal state.

During economic upswings the country will have more economic output and more growth rate which means that country will have jump in growth and out of economy where we cannot be sure that it will move in same momentum as it a sudden increase due to economic upswings which may change over a period of time.

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