Macro - Business Cycles

Question 1

Business Cycles

Answer 1

When aggregate demand is measured over time; fluctuations in aggregate GDP (real)

Expansionary period, peak, recessionary, trough (low point), and then the cycle begins anew

Recession - 2 or more quarters of negative change in real GDP; downturn in real GDP of 10% or less.

Extreme recession = Depression; real GDP decline exceeding 10%; 2 or more years

Question 2

Business Cycle and Indicators

Answer 2

Changes in specific measures of economic activity that are associated with changes in business cycle

Leading indicator - change in measure before change in business cycle (consumer expectations, initial unemployment claims, stocks, etc)

Lagging indicator - change in measure after change in business cycle (commercial loans outstanding, consumer installment credit and personal income)