13+Business+Cycles--An+Introduction

13+Business+Cycles--An+Introduction - 1 13-1 Business...

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Unformatted text preview: 1 13-1 Business Cycles: An Introduction 13-2 Agenda 1. Business Cycle Basics 2. Macro Variables and the Business Cycle 3. Time Horizons in Macroeconomics 13-3 Business Cycle Basics • Business cycles are the short-run fluctuations in aggregate economic activity around its long-run growth path. – Many economic activities will expand and contract together in a recurring, but not periodic, fashion. 13-4 Business Cycle Basics Time Business activity 2 13-5 Business Cycle Basics • Business cycles are divided into 4 parts: 1. The peak, 2. The contraction or recession, 3. The trough, and 4. The recovery and expansion. 13-6 Business Cycle Basics 1. The peak is the maximum level that aggregate economic activity reaches before it begins to contract. 2. The contraction or recession is the period of time when aggregate economic activity is shrinking. – A depression is a particular long and severe recession. 13-7 Business Cycle Basics 3. The trough is the lowest level that aggregate economic activity reaches before it begins a sustained expansion. 4. The recovery and expansion is the period of time when aggregate economic activity is growing. – A boom is an extended economic expansion where aggregate economic activity is very high. 13-8 Business Cycle Basics • A growth recession occurs when aggregate economic activity is expanding but at such a slow pace that the unemployment rate is still increasing. 3 13-9 Business Cycle Basics Real Gross Domestic Product SAAR, Bil.Chn.2000$ 83 82 81 80 79 Source: Bureau of Economic Analysis /Haver Analytics 5700 5600 5500 5400 5300 5200 5100 5700 5600 5500 5400 5300 5200 5100 13-10 Business Cycle Basics Real Gross Domestic Product % Change - Annual Rate SAAR, Bil.Chn.2000$ 83 82 81 80 79 Source: Bureau of Economic Analysis /Haver Analytics 12 8 4-4-8 12 8 4-4-8 13-11 Business Cycle Basics • The business cycle is the sequence from one peak to the next peak or from one trough to the next trough. • Peaks and troughs are called turning points . – Officially designated by the NBER Business Cycle Dating (BCD) Committee. – Typically wait 9 – 24 months after the fact before deciding on turning points....
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This note was uploaded on 03/13/2012 for the course ECON 100B taught by Professor Wood during the Fall '08 term at Berkeley.

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13+Business+Cycles--An+Introduction - 1 13-1 Business...

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