ch146 - CHAPTER CHECKLIST <When you have completed your...

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Cobbe ECO2013 Chapter 14 Fall 2003 p. 1 of 9 < 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 Explain the influences on aggregate supply. 2 Explain the influences on aggregate demand. 3 Explain how fluctuations in aggregate demand and aggregate supply create the business cycle. 4 14.1 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 points, 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 organization, the National Bureau of Economic Research (NBER). 14.1 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. 14.1 DEFINITIONS AND FACTS < U.S. Business-Cycle History The NBER has identified 32 complete cycles starting from a trough in December 1854. Over all 32 complete cycles: The average length of an expansion is 35 months (almost 3 years), the average length of a recession is 18 months. The average time from trough to trough is 53 months (almost 4 1 /2 years). 14.1 DEFINITIONS AND FACTS So over the 147 years of the 32 complete cycles 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 147-year averages hide significant changes that have occurred over the 150 years: - in the length of a cycle and - the relative length of the recession and expansion phases.
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Cobbe ECO2013 Chapter 14 Fall 2003 p. 2 of 9 14.1 DEFINITIONS AND FACTS Figure 14.1 summarizes U.S. recession, expansion, and cycle length since 1854. Recessions have shortened. Expansions have lengthened, and complete cycles have lengthened. 14.1 DEFINITIONS AND FACTS < Recent Cycles The current cycle began at a trough that followed a recession that ran from July 1990 to March 1991. The economy expanded from March 1991 until March 2001. This expansion, which lasted for 120 months, was the longest in U.S. history. Recent Cycles < The NBER determined that the recession that started in March 2001 ended in a trough in November 2001, for an eight month-long recession [slightly shorter than the post-1945 average, eleven months]. Since then we have been in a new expansion, according to the NBER. < However, the expansion is a little unusual, in that
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ch146 - CHAPTER CHECKLIST &lt;When you have completed your...

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