Chapter 13: Understanding Business Cycles Flashcards
Business cycles
Are recurrent expansions and contractions in economic activity affecting broad segments of the economy.
Classical cycle
Refers to fluctuations in the level of economic activity when measured by GDP in volume terms.
Growth cycle
Refers to fluctuations in economic activity around the long-term potential trend growth level, focusing on how much actual economic activity is below or above trend growth in economic activity.
Growth rate cycle
Refers to fluctuations in the growth rate of economic activity.
Expansion
The period of a business cycle after its lowest point and before its highest point.
Contraction
The period of a business cycle after the peak and before the trough; often called a recession or, if exceptionally severe, called a depression.
Boom
An expansionary phase characterized by economic growth “testing the limits” of the economy.
Economic indicators
Economic statistics provided by government and established private organizations that contain information on an economy’s recent past activity or its current or future position in the business cycle.
Leading economic indicators
Turning points that usually precede those of the overall economy; they are believed to have value for predicting the economy’s future state, usually near-term.
Coincident economic indicators
Turning points that are usually close to those of the overall economy; they are believed to have value for identifying the economy’s present state.
Lagging economic indicators
Turning points that take place later than those of the overall economy; they are believed to have value in identifying the economy’s past condition.
Diffusion index
Reflects the proportion of the index’s components that are moving in a pattern consistent with the overall index.
