What is the expansion phase
production, employment and income are increasing
when does expansion phase end
business cycle peak
What is a recession phase
production, employment and income decline
what marks the end of the recession phase
business cycle trough
What is the National Bureau of Economic Research (NBER)
Most economists accept this Bureau’s decisions of Business Cycle Datings,
What is the NBER’s definition of a recession
significant decline in activity spread across the country, lasting for more than a few months, visible in industrial production, employment, real income, and wholesale-retail trade
describe steps leading to and steps during recession
- during height of expansion firms and households get a lot of debt so they begin to cut back on spending
- firms spend less on capital goods
- Sales decline - cut back on production and lay off workers
4 as recession continues, conditions begin to improve
What are durables
goods expected to last for 3 or more years
what are nondurables
goods expeted to last for 3 or less years
which type of goods are more affected by business cycles
nondurable goods
What happens to inflation rates during expansions and recessions?
Inflation rates rise in expansions and fall during recessions
why is there a lag in the decrease of the unemployment rate after recessions
- employment can be rising more slowly than the increase in labor force due to participation growth
- firms can still operate well below their capacity after recession
What was the Great Moderation
Large period of time in US history when there were no severe recessions, ended once the 2009 disaster happened
Why did the US have stability from 1950 to 2007?
- Increase importance of services and declining importance of goods.
- unemployment insurance and other programs to provide funds to those unemployed
- federal policies to stabilize the economy
- Increase in stability of the financial system
