Unit II: Business Cycles
Business cycles are a fluctuation in economic activity that an economy experiences over a period of time. They have four main sections:
Expansion is a period of economic upturn when output and employment are rising.
The peak is the highest point of real GDP. It is near or at full employment.
A contraction, also known as a recession, is where real GDP decreases for at least six months.
A trough is the lowest point of real GDP. It has the least amount of spending and the highest unemployment.
Some important information to remember:
Expansion is a period of economic upturn when output and employment are rising.
The peak is the highest point of real GDP. It is near or at full employment.
A contraction, also known as a recession, is where real GDP decreases for at least six months.
A trough is the lowest point of real GDP. It has the least amount of spending and the highest unemployment.
Some important information to remember:
- One cycle is from trough to trough
- An average cycle is five to seven years
- Recessions last about fourteen months
- Peaks and troughs are meaningless because we never know we're in one until it's over
- A trough means the end of a recession
- If a recession loses more than 10% of real GDP, then it's a depression
For more information, please refer to these videos on Khan Academy:
The business cycle: https://www.khanacademy.org/economics-finance-domain/ap-macroeconomics/economic-iondicators-and-the-business-cycle/business-cycles/v/the-business-cycle?modal=1
Business cycles and the production possibilities curve: https://www.khanacademy.org/economics-finance-domain/ap-macroeconomics/economic-iondicators-and-the-business-cycle/business-cycles/v/business-cycles-and-the-production-possibilities-curve?modal=1
While under a recession, does deflation occur, and how would a recession affect the labor force with unemployment?
ReplyDeleteGreat question. Inflation is one of the major causes of recessions so it wouldn't be deflation. Recessions lead to cyclical unemployment, which increases the number of unemployed and decreases the number of employed. Workers are either fired or laid off because firms need to start cutting costs.
Delete