ECN 301 Chapter Notes - Chapter 8: Business Cycle, National Bureau Of Economic Research, Canadian Business

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Since 1945, contractions have shortened to an average of 14 months, and expansions have lengthened to an average of 110 months. Finally, a lagging variable is one whose peaks and troughs tend to occur later than the corresponding peaks and troughs in the business cycle. Figure 8. 4 shows the behaviour of industrial production in canada since 1966. the cyclical sensitivity of production in some sectors of the economy is greater than in others. Industries that produce relatively durable, or long-lasting, goods houses, consumer durables (refrigerators, cars, washing machines), or capital goods (drill presses, computers, factories) respond strongly to the business cycle, producing at high rates during expansions and at much lower rates during recessions. In contrast, industries that produce relatively nondurable or short-lived goods (foods, paper products) or services (education, insurance) are less sensitive to the business cycle. For components of expenditure, as for types of production, durability is the key to determining sensitivity to the business cycle.

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