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Chapter 3

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Western University
Economics 2152A/B

Business cycles: fluctuations about trend in real gross domestic product Peaks: a relatively large positive deviation from trend Trough: relatively large negative deviation from trend Turning points: peaks and troughs in the deviations from trend in real GDP Amplitude: the maximum deviation from trend Frequency: the number of peaks in real GDP that occur per year Boom: a series of positive deviations from trend culminating in a peak Recession: a series of negative deviations from trend culminating in a trough Persistent: when real GDP is above trend it tends to stay above trend, and when it is below trend, it tends to stay below trend. Time series: typically we look at these time series two at a time, and a good starting point is to plot the date. - Macroeconomic variables are measured by time series -real GDP is measured in a series of quarterly observations over time Comovement: macroeconomic variables fluctuate together in patterns that exhibit strong regularities.  Procyclical: an economic variable’s deviations from trend are positively correlated with the deviations
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