Download Business Cycles

Long-Run Economic Growth and Business Cycles: Before the
Potential Real GDP
Great Panic
Actual GDP
Potential GDP
Post – World War II
Steady growth with two serious
slumps:
1974-55 (oil shock and
stagflation)
1980-82 (Volcker Disinflation).
1982 – 2007: The Great Moderation
The Business Cycle
Some Basic Business Cycle Definitions
The Business Cycle
The Great Panic vs. Recession of 2001
Making
the
Connection
Who Decides if the Economy
Is in a Recession?
PEAK
TROUGH
LENGTH OF
RECESSION
July 1953
May 1954
10 months
August 1957
April 1958
8 months
April 1960
February 1961
10 months
December 1969
November 1970
11 months
November 1973
March 1975
16 months
January 1980
July 1980
July 1981
November 1982
July 1990
March 1991
8 months
March 2001
November 2001
8 months
December 2007
Ongoing
6 months
16 months
21 months+
What Happens during a Business Cycle?
The Effect of the Business Cycle on the Inflation Rate
The Effect of the 2001
Recession on the
Inflation Rate
Inflation and the Business Cycle: The Great Panic in
Perspective
What Happens during a Business Cycle?
The Effect of the Business Cycle on the Inflation Rate:
Not Counting the Great Panic
What Happens during a Business Cycle?
The Effect of the Business Cycle on the Unemployment Rate
Unemployment Rate: Great Panic vs. Recession of 2001
Duration of Unemployment:Great Panic vs. Recession of 2001
What Happens during a Business Cycle?
The Effect of the Business Cycle on the Unemployment Rate:
Not Counting the Great Panic
What Happens during a Business Cycle?
Recessions Have Been Milder and the Economy Has Been More Stable
Since 1950: The Great Panic Doesn’t Compare with the Great
Depression of the 1930s and the WWII Boom and Demobilization Slump
FIGURE 9.12
Fluctuations in Real GDP, 1900–2006
What Happens during a Business Cycle?
Recessions Have Been Milder and the Economy Has Been
More Stable Since 1950
The Business Cycle Has
Become Milder
PERIOD
AVERAGE LENGTH
OF EXPANSIONS
AVERAGE LENGTH
OF RECESSIONS
1870-1900
26 months
26 months
1900-1950
25 months
19 months
1950-2001
61 months
9 months
The Business Cycle
Why Is the Economy More Stable?
•BIG Government
Automatic stabilizers
• unemployment insurance and other
government transfer programs that provide
funds to the unemployed.
• Active federal government
policies to stabilize the economy.
• The increasing importance of services
and the declining importance of goods.