BUSINESS CYCLES

- 1 cycle occurs from trough to trough

- Cycle avg. 5 - 7 years

- Recessions last approx. 14 months

- Peaks and troughs meaningless b/c we never know we are in one until 

  its over

Recession/Contradiction- real GDP declines for 6 months

                          - due to reduction in spending

                          - increase in unemployment

 

Peak- Highest point of real GDP; shows max amount of spending and min unemployment; inflation is a problem.

Expansion (recovery)- Real GDP up b/c of increase in spending and decrease in unemployment.

Trough- Lowest point of Real GDP: max unemployment and min spending