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Lecture 43

ECON 1020 Lecture 43: Lecture 43

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ECON 1020
Ryan A.Compton

c78 CHAPTER 7 Business Cycles, Unemployment, and Inflation The Business Cycle: Economic theory: deriving economic principles from relevant economic facts; an economic principle Business cycle: alternating increases and decreases in economic activity over time Phases of the Business Cycle: Peak: economy is at full employment and real output is close to economys capacity o The price level is likely to rise during this phase Recession: a period of decline in total output, income, and employment Lasts 6 months or more, and is marked by the widespread contraction of business activity in many sectors of the economy Trough: point in recession or depression where output and employment reach their lowest levels The trough phase may be either shortlived or quite long A recession is usually followed by a recovery expansion Expansion: the phase of the business cycle during which output and employment rise toward full employment At some point, the economy again approaches full employment If spending them expands more rapidly than does production capacity, prices of nearly all goods and services will rise (inflation) The phases of the business cycle vary greatly in duration and intensity Talk of business fluctuations rather than cycles, because cycles imply regularity but fluctuations do not FIGURE 71: The Business Cycle Provincial Variations: National GDP data for Canada conceal significant differences in economic fluctuations among Canadas provinces and territories TABLE 72: Percentage Change in Real GDP for Provinces and Territories 2010 Causation: A First Glance: The longrun trend of the Canadian economy is toward expansion and growth
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