Download The Business Cycle

The Business Cycle
The Business Cycle may have 4 or
5 phases.
Phases of the Business Cycle
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•
•
•
•
Peak
Contraction* (Recession and Depression)
Trough
Recovery**
Expansion
Phases of the Business Cycle in Detail
• Peak – when real GDP stops rising, the height
of economic expansion
• The economy is at full employment
• Real output is close to capacity
• The price level is likely to rise during this phase
Phases of the Business Cycle in Detail
• Contraction - a period of economic decline
marked by a fall in real GDP.
• Falling output generally causes unemployment
to rise
• Inflation is falling
Phases of the Business Cycle in Detail
• Trough – The lowest point of economic decline,
when real GDP stops falling.
• This phase of the cycle may be short-lived or
long
Phases of the Business Cycle in Detail
• Recovery- The recovery is the period when
Real GDP is rising; it begins at the trough and
ends at the initial peak.
Phases of the Business Cycle in Detail
• Expansion -a steady, long term rise in real
GDP. Economic Growth.
•
•
•
•
•
Stock Market is Strong
Increase Confidence
Inflation Remains Low
Falling Unemployment
Business Prosperity
Business Cycle Issues
• Recession (Contraction) – a prolonged economic
contraction, of at least 6 months (2 consecutive
quarters).
• Usually lasting 6 to 18 months.
• Typically marked by rising unemployment
between 6 to 10 percent.
Business Cycle
• An entire business cycle is measured from Peak
to Peak.
• The typical Business Cycle is approximately four
to five years.
• Although some have been shorter and longer.
Business Cycle Issues
• Depression – an especially long or prolonged
recession.
• High Unemployment and low output.