The Long-Run Trend in Real GDP Is Upward

question 114

Essay

The long-run trend in real GDP is upward. How is this possible given business cycles? What explains the upward trend?

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Definitions:

Times Interest Earned Ratio

This ratio measures a company's ability to meet its debt obligations based on its current income, calculated as earnings before interest and taxes divided by interest expense.

Income Before Taxes

The amount of revenue left after deducting all operating expenses, interest, and depreciation, but before paying income taxes.

Straight-Line Method

A depreciation technique where an equal amount of depreciation is charged for each year of the asset's useful life.

Semiannual Interest

Interest that is calculated and paid twice a year, often used in the context of bonds and loans.