ch29lecture - ECONOMICFLUCTUATIONS PART 10 AS-AD and the...

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PART 10 ECONOMIC FLUCTUATIONS AS-AD and the Business Cycle CHAPTER 29
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When you have completed your study of this chapter, you will be able to C H A P T E R C H E C K L I S T Provide a technical definition of recession and describe the history of the U.S. business cycle. 1 Define and explain the influences on aggregate supply. 2 Define and explain the influences on aggregate demand. 3 Explain how fluctuations in aggregate demand and aggregate supply create the business cycle. 4
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29.1 BUSINESS-CYCLE DEFINITIONS AND FACTS The business cycle is a periodic but irregular up-and-down movement in production and jobs. A business cycle has two phases, expansion and recession, and two turning point, a peak and a trough. Dating Business-Cycle Turning Points The task of identifying and dating business- cycle phases and turning points is performed by a private research
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29.1 BUSINESS-CYCLE DEFINITIONS AND FACTS To date the business-cycle turning points, the NBER needs a definition of recession. Recession A decrease in real GDP that lasts for at least two quarters (six months) or a period of significant decline in total output, income, employment, and trade, usually lasting from six months to a year and marked by widespread contractions in many sectors of the economy.
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29.1 BUSINESS-CYCLE DEFINITIONS AND FACTS U.S. Business-Cycle History The NBER has identified 33 complete cycles starting from a trough in December 1854. Over all 33 complete cycles: The average length of an expansion is 35 months and the average length of a recession is 18 months. The average time from trough to trough is 53 months.
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29.1 BUSINESS-CYCLE DEFINITIONS AND FACTS So over the 152 years since 1854, the U.S. economy has been in: Recession for about one third of the time Expansion for about two thirds of the time. The 152-year averages hide significant changes that have occurred in the length of a cycle and the relative length of the recession and expansion phases.
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29.1 BUSINESS-CYCLE DEFINITIONS AND FACTS Figure 29.1 summarizes U.S. recession, expansion, and cycle length since 1854. Recessions have shortened. Expansions have lengthened, and complete cycles have lengthened.
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29.1 BUSINESS-CYCLE DEFINITIONS AND FACTS Recent Cycles The last completed cycle began at a trough of March 1991 and ended at a trough of November 2001. The economy expanded from March 1991 until March 2001. This expansion, which lasted for 120 months, was the longest in U.S. history.
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29.1 BUSINESS-CYCLE DEFINITIONS AND FACTS Figure 29.2(a) shows the recent cycles in real GDP. Recessions began in mid-1990 and in first quarter of 2001. The longest expansion in U.S. history ran from the March 1991 to March 2001.
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29.1 BUSINESS-CYCLE DEFINITIONS AND FACTS When real GDP decreased in the recession (part a), The unemployment rate increased (part b). And a little later, the inflation
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This note was uploaded on 10/29/2010 for the course ECO 33815 taught by Professor Trejo during the Spring '10 term at University of Texas at Austin.

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ch29lecture - ECONOMICFLUCTUATIONS PART 10 AS-AD and the...

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