3 pages essay

REVIEW FOR ASSIGNMENT 3.

THEMES AND TOPICS COVERED FOR THIS ESSAY

CHAPTER 2:

· Who defines/studies the business Cycle the National Bureau of Economic Research (NBER)

· Definition: a significant decline in economic activity spreads across the economy and can last from a few months to more than a year

· Phases: Peak, Trough, which expansion and contraction

· Recession output must be falling for at least a few months 6 months

· Problems time lag and growth recessions (positive but below average)

· Depression no definition joke: a recession: when your neighbor loses their job, a depression: when you lose your job.

· Indicators: leading, lagging, coincident AND counter-cyclical and pro-cyclical

· 7 basic characteristics of the Business Cycle

· Are not cyclical

· Not symmetrical

· Have changed over time

· GP and WWII

· Components of GDP vs GPD I is pro, G is counter, NX is counter

· Associated with changes in the labor markets

· More frequent in the poorer countries

· Look at Labor market, money supply and inflation, capacity and productivity, Expectation

CHAPTER 3:

· Early business cycles:

· Agriculture

· Jevons: sunspots

· Malthus:

· Under-consumption

· Hobson

· Marxist theories

· Marx

· Classical Model:

· 3 assumptions: perfect competition, real values, same preferences

· How is output determined: Y= F (L, K) and factors that influence each one

· How is demand determined? quantity theory of money

· What about the business cycles in the classical model?

1. GDP in red Business Cycle PEAK: 02/2008: 15,752.308

03/2008: 15,667.032

04/2008: 15,328.09

2. Industrial Production in green Procyclical and leading PEAK: 12/2007: 105.33 (3 months lead)

01/2008: 105.07

02/2008: 104.46

3. SP500 in blue Prociclical and leading PEAK: 10/2007: 2423 (4 months lead)

11/2007: 2322

4. Unemployment rate in Brown countercyclical and lagging PEAK 10/2009 10%