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Unformatted text preview: Business Cycles by Christina D. Romer The United States and all other modern industrial economies experience significant swings in economic activity. In some years most industries are booming and unemployment is low; in other years most industries are operating well below capacity and unemployment is high. Periods of economic expansion are typically called booms; periods of economic decline are called recessions or depressions. The combination of booms and recessions, the ebb and flow of economic activity, is called the business cycle. Business cycles as we know them today were first identified and analyzed by Arthur Burns and Wesley Mitchell in their 1946 book, Measuring Business Cycles. One of their key insights was that many economic indicators move together. During a boom, or expansion, not only does output rise, but also employment rises and unemployment falls. New construction and prices typically rise during a boom as well. Conversely, during a unemployment falls....
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