Chapter Fourteen: Analyzing Business Cycles
Business cycles are the recurring contractions and/or expansions of any national economy. (This is most often measured through the GDP). Cycles will vary in length and can last up to ten years or longer. There are always some distinctive phases that economists use to recognize where any particular economy is in the process or cycle. These phases include expansion, peak, contraction and trough.
It is not difficult to understand where any particular economy is in its individual cycle because there are some common occurrences frequently connected to the phases. For instance, inflation is a common event during an expansion, and unemployment tends to rise during any period of contraction.
How is the business cycle actually measured? You apply the items you learned about in the previous section: the unemployment rate, the GDP, and the rate of inflation. For instance, the GDP that has increased since the previous year, along with the increasing rate of inflation is usually indicative of an expanding business cycle.
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