Understanding the Business Cycle: Fluctuations in Economic Activity and Growth

The video explains the business cycle, highlighting the regular fluctuations in economic activity that economies experience over time. It describes the stages of the business cycle: growth, boom, recession, and trough, and how these stages affect real GDP, inflation, and deflation. The video emphasizes that while real GDP may increase over time, it does not do so smoothly due to these fluctuations. Understanding these cycles helps in analyzing economic conditions and predicting future trends.

How does the text describe the relationship between real GDP and inflationary pressures?

What is meant by a 'negative output gap' as mentioned in the text?