HarrisonTMBA5130-8 - Business Cycle Change in economic...

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Business Cycle Change in economic activity for a specific period Economic activity can happen in two directions: o relative rapid growth o decline Real Gross Domestic Product (GDP) measures business cycle
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Stages of Business Cycle Occurs between trough and peak Expansion moves to contraction Contraction begins from peak and ends at trough Move to the expansion from the contraction phase Peak Phase Expansion Phase Contraction Phase Trough Phase
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Unemployment Increases during contractions phase Falls during expansion phase The lower point unemployment takes place before the setting of the peak High point takes place following the trough
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Growth of GDP and Unemployment The rate of unemployment is inversely associated with the GDP During peak phase, the economy grows fast and unemployment drops When the economy is nearing the trough economy, there is slow growth and the rate of unemployment increases
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Inflation During the contraction phase, the rate of inflation and output fall At the recovery period, the economy gets close to the peak
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