Business Cycle Notes

Business Cycles Notes

GDP Quarterly Reports	3 months of real GDP data + or – Q I = Jan – Mar,  QII = Apr – June, QIII = July – Sep, Q IV = Oct -- Dec
Expansions	2 consecutive quarters, or longer,  of growth in real GDP
Peaks	The quarter when GDP stops growing.  This can only be recognized after the recession has begun
Recessions/Contractions	2 consecutive quarters, or longer, of decline in real GDP (NBER uses newer, job related measures)
Troughs	The quarter when GDP stops declining.  This can only be recognized after the expansion has begun
Depressions	Traditionally measured as a recession that loses at least 10%, or more, of the value of real GDP
Stagflation	A time of increasing inflation (associated with expansions) and increasing unemployment (associated with recessions)
A Full Cycle	The time of one trough to the next trough
Historic Cycles	Since the founding of the US, cycles have averaged approximately 6 years from trough to trough
Historic Recessions	Since the early 1900’s, US recessions have averaged 14 months in length.
NBER	The National Bureau of Economic Research.  This agency is now often used as the official arbitrator of the cycles
Long Run Growth Assumptions	This is known as the Secular Trend.  Market Systems have shown long run growth in real GDP/Standard of Living as the PPF moves outward over time
Misery Index	The number created when the Inflation Rate is added to the Unemployment Rate

Business Cycles Notes

Secular Trend	The Private Assumption of Long Term Growth
Expansion	Growth for at least 6 months of real GDP (Inflation?)
Peak	The time Expansions end
Contraction Recession	Decline for at least 6 months of real GDP (Unemployment?)
Trough	The time Contractions end
Six Months	The minimum time GDP data is relevant to cycles
Trough to Trough	The “length” of a cycle
Six Years	The average length of a cycle in the US history 1776-2011
Fourteen Months	The average length of a recession in the US 1900-2011
Stagflation	Both Expansion and Recession at the same time
Misery Index	The Unemployment Rate and the Inflation Rate together