Chapter 9 Analysis - Francis E Arnold Jr Chapter 9 Analysis...

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Francis E. Arnold Jr Chapter 9 Analysis Macroeconomics 3/18/2014 The business cycle is the growth and decline in the economy over a long period of time. The business cycle has four phases in which are used to describe the effect of what’s happening when things are going well or bad. When the economy maximizes its output and has full employment this is called a peak. When there is a peak it is safe to say that almost everyone has a job, people are spending money on consistent basis and that everyone is contributing in some way, shape, or form. When the economy is at its peak it can also hit rock bottom, this is called a recession. A recession is the opposite of a peak, employment is at a low, there the output is on a decline, and there is minimum income. However, just because there is a recession doesn’t mean employment, output, and income are at an all-time low, this just means it’s on the decline. When the economy is facing a recession and employment, income, and output hits an all-time low this is called a trough. The trough is the third phase of the business cycle and why this is the scariest of the four is because it can be short lived and that mean a rise in the economy will be happening shortly or it can last a while which can potentially have companies go down and people lose their jobs. If the economy did have a recession this will be followed by an n expansion the fourth phase. The expansion is the recovery of the economy this is when there is a rise in the output, income, and employment. These four phases are what we use to describe the economy but what causes a business cycle?
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