Business Cycles The Business Cycle BoomPeak Contraction Recession

Business Cycles

The Business Cycle Boom/Peak Contraction & Recession Expansion & Recovery Depression Recovery

Activity Using your text and internet, summarize the following: n Research recessions in Canada. Statistics as well as dates, and discussions of major downtrends across the country. Focus on the regional differences across Canada with regards to economic trends. One coast can be in poverty while the other is in growth. n

n 1. How can you tell when the economy is growing? List some indicators of growth. n 2. How can you tell when the economy is approaching a recession? Are there indicators

Real GDP Peak C on tr ac tio n Ex pa ns io n The business cycle is the cycle of expansion and contraction in the economy. Trough Time Long-run trend of output

An expansion is a sustained rise in the real ouput of an economy n A contraction is a sustained fall in the real output of an economy n A peak is the point in the business cycle at which real output is at its highest n A trough is the point in the business cycle at which real output is at its lowest n

When actual output exceeds potential output, the resulting inflationary gap is the difference between the real output (point a) and potential output (point b). Real output then falls below its potential level. In this case, the recessionary gap is the amount by which real output falls short of its potential (the difference between point c and d). Peak Real GDP a c Inflationary Gap d b Trough Time Long-run trend of output (potential) Recessionary Gap