Reading 15 EOC 7 - output gap

CFA Level III Economics
#1

In Reading15 EOC 7, based on the information given, can we conclude that there was a +ve output gap which is now reducing, which can be seen from:

  • lowering of GDP

  • increasing unemployment

  • decreasing inflation

and the GDP is now moving towards the trend line ( most lkely we are in the slowdown phase of the business cycle) ?

#2

Anyone on this?

#3

You can find the answer at Page 54 (Point 5) or Page 53 (Point 1) depends on the future economy expectation.

You will see GDP declining,unemployment increasing.This is a sign of depression.Country will experiencing downward inflation presure.

If in the future we are expecting recovery than country will turn into Initial Recovery phase where country will experience further downward inflation presure and output gap remain high.