THE BUSINESS CYCLE “The roller coaster of Macroeconomics”

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Presentation transcript:

THE BUSINESS CYCLE “The roller coaster of Macroeconomics”

WHAT IS THE BUSINESS CYCLE??

BUSINESS CYCLE  Measures real GDP over time  Shows the increase or decrease in Y throughout time in a graphic way.  Phases of the Business Cycle  Expansion/Recovery Phase- real GDP increases over time (Economic Growth)  Potential Problem - inflation  Contractionary/Recessionary Phase- real GDP decreases over time  Recessions are two consecutive quarters of negative GDP growth  Potential Problem – deflation and unemployment  Peak- the highest point in an Expansion phase before a recessionary phase  Trough- the lowest point in a recessionary phase before an expansionary phase  Growth Trend Line- average constant growth rate of the economy over time

THE BUSINESS CYCLE vPEHRRE

WHAT CAUSES THE UPS AND DOWNS??  Capital Expenditures WHY???

WHAT CAUSES THE UPS AND DOWN???  Inventory WHY???

WHAT CAUSES THE UPS AND DOWNS????  Innovation WHY???

WHAT CAUSES THE UPS AND DOWNS???  External / Exogeneous Shocks-  Demand side  Supply side WHAT ARE SOME REAL EXAMPLES?

WHAT CAUSES THE UPS AND DOWNS???  Government Policy  Fiscal  Regulatory

WHAT CAUSES THE UPS AND DOWNS???  EXPECTATIONS!!!

THE US BUSINESS CYCLE Please provide one CD/One CM