Midterm 2 Study Guide - Business Cycles

Midterm 2 Study Guide - Business Cycles - Business Cycles...

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Business Cycles Contraction or recession o The period of time when real GDP is falling A severe recession is a depression Expansion or boom o The period of time when real GDP is growing Characterizing cycles o The entire sequences measured from peak to peak or trough to trough is a business cycle o Peaks and troughs are called turning points Data used to analyze business cycles are: o Investment o Employment o Industrial production o Money supply US Business Cycle Key Facts o Consumption is a lot less volatile than real GDP o Investment is a lot more volatile than real GDP o Civilian employment and hours worked are procyclical o The unemployment rate is countercyclical o Government purcahses are only somewhat cyclical What are good indicators of business cycles? o Correlated with variables we are interested in o Leads variables we are interested in o Timely: available quickly o Stable: not subject to significant revision that would make in sample
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