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Understanding Business Cycles

Understanding Business Cycles. Stages of a Business Cycle. Expansion Phase Boom Peak Contraction Phase Slowdown Recession (2+ quarters) Trough. Business Cycle: Expansion. Business Cycle: Peak. Business Cycle: Contraction. Business Cycle: Recession. Business Cycle: Trough.

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Understanding Business Cycles

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  1. UnderstandingBusiness Cycles

  2. Stages of a Business Cycle • Expansion Phase • Boom • Peak • Contraction Phase • Slowdown • Recession (2+ quarters) • Trough

  3. Business Cycle: Expansion

  4. Business Cycle: Peak

  5. Business Cycle: Contraction

  6. Business Cycle: Recession

  7. Business Cycle: Trough

  8. Business Cycle: Recovery

  9. Business Cycle: Expansion

  10. U.S. Economy: 1970-2006Cycles of Booms, Busts and Recessions Expansion Contraction Source: Bureau of Economic Analysis

  11. U.S. Economic RecessionsHow Long and How Severe? Peak Trough Average Duration: 10 Months Average Severity: -1.8% (Real GDP) Historical Period MonthsFeb ‘45 - Oct ’45 8 Nov ‘48 - Oct ’49 11 Jul ‘53 - May ’54 10 Aug ‘57 - Apr ’58 8 Apr ‘60 - Feb ’61 10 Dec ‘69 - Nov ’70 11 Historical Period MonthsNov ‘73 - Mar ’75 16 Jan ‘80 - Jul ’80 6 Jul ‘81 - Nov ’82 16 Jul ‘90 - Mar ’91 8 Mar ‘01 - Nov ’01 8

  12. Tracking theBusiness Cycle

  13. Useful Economic Indicators • Gross Domestic Product(GDP) • Interest Rates (Federal Funds Rate) • Inflation (Consumer Price Index or CPI) • Employment (Number of New Jobs) • Unemployment (%) • Income Growth (% Change) • Corporate After Tax Profits (% Change)

  14. Tracking the Business Cycle Expansion Contraction • Interest Rates: Up Down • Inflation: Up Down • Employment: Up Down • Unemployment: Down Up • Income: Up Down • Corp. Profits: Up Down

  15. Go For It!

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