Professor K.D. Hoover, Econ 210D Topic 2 Spring 2015 1 Econ 210D Intermediate Macroeconomics Spring...
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Transcript of Professor K.D. Hoover, Econ 210D Topic 2 Spring 2015 1 Econ 210D Intermediate Macroeconomics Spring...
Professor K.D. Hoover, Econ 210D Topic 2 Spring 2015 1
Econ 210D Intermediate Macroeconomics
Spring 2015Professor Kevin D. Hoover
Topic 2Trends and Cycles
Professor K.D. Hoover, Econ 210D Topic 2 Spring 2015 2
Professor K.D. Hoover, Econ 210D Topic 2 Spring 2015 3
Professor K.D. Hoover, Econ 210D Topic 2 Spring 2015 4
Professor K.D. Hoover, Econ 210D Topic 2 Spring 2015 5
Computing a Centered Moving-Average Trend
Center
billion
YYYYYY trend
8.589,11$5
9.340,111.522,114.712,114.727,110.646,11
51:094:083:082:081:08
3:08
Professor K.D. Hoover, Econ 210D Topic 2 Spring 2015 6
Professor K.D. Hoover, Econ 210D Topic 2 Spring 2015 7
Original and Detrended Series
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Professor K.D. Hoover, Econ 210D Topic 2 Spring 2015 9
Definition of the Business Cycle BUSINESS CYCLE – the alternation in the
state of the economy of a roughly consistent periodicity and with rough coherence between different measures of the economy
Professor K.D. Hoover, Econ 210D Topic 2 Spring 2015 10
Anatomy of the Business Cycle Peak = the point of locally greatest economic
activity Trough = the point of locally lowest economic
activity Period of rising from trough to peak = boom,
expansion, recovery Period of falling from peak to trough = slump,
recession, contraction Complete Cycle = period from peak to peak
or trough to trough
Professor K.D. Hoover, Econ 210D Topic 2 Spring 2015 11
Professor K.D. Hoover, Econ 210D Topic 2 Spring 2015 12
Miscellaneous Business-cycle Terminology Depression = a large recession Growth Recession = a period of growth
that is positive, yet so slow, so that the unemployment rate rises
Professor K.D. Hoover, Econ 210D Topic 2 Spring 2015 13
Dating the Business Cycle
Two-quarter Rule: recession is two consecutive quarters of negative growth in real GDP
NBER Definition: a recession = “a recurring period of decline in total
output, income, employment, and trade, usually lasting from six months to a year, and marked by widespread contractions in many sectors of the economy.”
Professor K.D. Hoover, Econ 210D Topic 2 Spring 2015 14
Business-cycle Indicators - 1
coincident = reaches peaks and troughs at the same time as the business cycle as a whole.
leading = reaches its peak ahead of the business-cycle peak; and its trough ahead of the business-cycle trough;
lagging = reaches its peak behind the business-cycle peak; and its trough behind the business-cycle trough.
Professor K.D. Hoover, Econ 210D Topic 2 Spring 2015 15
Business-cycle indicators – 2
mixed indicators = different incidence relative to business-cycle peaks and troughs.
acyclical indicators = no particular stable relationship to business cycle.
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Components of the Indicator Indices
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Professor K.D. Hoover, Econ 210D Topic 2 Spring 2015 20
END of Topic 2
Next Topic: 3. Long-term Economic Growth