ECN 204 Chapter 9: Chapter 9

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The business cycle: business cycle refers to alternating increases and decreases in the level of the economic activity. Individual cycles vary substantially in duration and intensity. Phases of the business cycle: at a peak, business activity has reached a temporary maximum. The economy is near full employment and the level of real output is at the economy"s capacity. The price level is likely to rise in this phase: a recession is a period of decline in total output, income, and employment. This is marked by the widespread contraction of business activity in many sectors of the economy. In the trough of the recession, output and employment bottom out at their lowest levels. Can be short-lived or long, this is where growth starts to pick up: a recession is usually followed by a recovery and expansion, which is a period where real gdp, income, and employment rise. This is the point where the growth accelerates.

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