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Macroeconomics plus MyEconLab plus eBook 1-semester Student Access Kit (6th Edition)

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Chapter 8 Business Cycles ± Learning Objectives I. Goals of Part 3 A) What causes business cycles? B) How should policymakers respond to cyclical fluctuations? 1. Classical economists see little need for government action 2. Keynesian economists think government intervention can smooth the business cycle C) Coverage of Chapters 8 to 11 1. Business cycle facts and features (Ch. 8) 2. The basic IS LM model (Ch. 9) 3. The classical model of the business cycle (Ch. 10) 4. The Keynesian model of the business cycle (Ch. 11) II. Goals of Chapter 8 A) Basic features of the business cycle B) Definition and brief history of U.S. business cycles C) Review of business cycle characteristics D) Preview of aggregate demand-aggregate supply model III. Notes to Fifth Edition Users A) The application, “Dating the Peak of the 2001 Recession” has been deleted but is available in this instructor’s manual in case you wish to continue to use it ± Teaching Notes I. What Is a Business Cycle? (Sec. 8.1) A) U.S. research on cycles began in 1920 at the National Bureau of Economic Research (NBER) 1. NBER maintains the business cycle chronology—a detailed history of business cycles 2. NBER sponsors business cycle studies
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154 Abel/Bernanke/Croushore • Macroeconomics, Sixth Edition Data Application A major compendium of studies on the business cycle was produced by the NBER in 1986, The American Business Cycle: Continuity and Change , edited by Robert J. Gordon, Chicago: University of Chicago Press. It contains general discussions of the then-current state of knowledge of the business cycle, research on components of expenditure and how they change over the cycle, discussions of the role of fiscal and monetary policies, and research on how the cycle has changed over time. Another NBER volume that is a great resource on business cycle information is Victor Zarnowitz’s book, Business Cycles: Theory, History, Indicators, and Forecasting , Chicago: University of Chicago Press, 1992. Zarnowitz discusses theories and evidence on the business cycle, including the NBER’s research role, research on the cyclical characteristics of cycles, an evaluation of coincident and leading indicators, and a broad discussion of many aspects of business cycle forecasting. B) Burns and Mitchell ( Measuring Business Cycles , 1946) make five main points about business cycles: 1. Business cycles are fluctuations of aggregate economic activity , not a specific variable 2. There are expansions and contractions a. Aggregate economic activity declines in a contraction or recession until it reaches a trough (Figure 8.1) Figure 8.1
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Chapter 8 Business Cycles 155 b. Then activity increases in an expansion or boom until it reaches a peak c. A particularly severe recession is called a depression d. The sequence from one peak to the next, or from one trough to the next, is a business cycle e. Peaks and troughs are turning points f. Turning points are officially designated by the NBER Business Cycle Dating Committee
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lect8 - Chapter 8 Business Cycles Learning Objectives I...

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