Part 1 - Business Cycle Measurement

Question 1

Regularities in GDP Fluctuations

Answer 1

• Business cycles are fluctuations around the trend in real GDP.
• Persistent positive deviations from trend are booms and persistent negative deviations from trend are recessions.

Question 2

The Hodrick-Prescott Filter

Answer 2

• Time series can be decomposed into two components, a trend component ytt and a cyclical component ytc
• The larger lamda is chosen, the smoother is the time path of yt

Question 3

variable is procyclical

countercyclical

Answer 3

If the deviations from trend in a macroeconomic variable are positively (negatively) correlated with the deviations
from trend in real GDP, then that variable is procyclical (countercyclical). acyclical

Question 4

Leading and Lagging Variables

Answer 4

• If a macroeconomic variable tends to aid in predicting the
  future path of real GDP, it is said to be a leading variable.
• If real GDP helps to predict the future path of a particular
  macroeconomic variable, then that variable is said to be a
  lagging variable.

Question 5

Summary of Business Cycle Facts

Answer 5

All Varibles are Procyclical exept of Price Level (Countercyclical)