Boom
- A boom occurs when real national output is rising at a rate faster than the trend rate of growth. Some of the characteristics of a boom include:
- A fast growth of consumption helped by rising real incomes, strong confidence and a surge in house prices and share prices
- A pick up in demand for capital goods as businesses invest in extra capacity to meet strong demand and to make higher profits
- More jobs created and falling unemployment and higher real wages
- High demand for imports which may cause the economy to run a larger trade deficit because it cannot supply all of the goods and services that consumers are buying
- Government tax revenues will be rising as people earn and spend more and companies are making larger profits – this gives the government money to increase spending in areas such as education, the environment, health and transport
- An increase in inflationary pressures if the economy overheats and has a positive output gap
