2.  The business cycle refers to the natural pattern of upturns (expansions, recoveries) & downturns (depressions, recessions) in the macroeconomy

3.  11 recessions since WWII with an average length of 10 months; average expansion is 5 years, 7 months  Full business cycles range from 18 months to 10 years, 8 months

4.  Two measures are used to determine recessions: ◦ Unemployment ◦ GDP  Macroeconomic analysis is aimed at making policy decisions that shorten recessions and lengthen expansions

5.  Employed + Unemployed = Labor force  Unemployment rate is the percentage of labor force unemployed  Unemployment goes up during a recession, down during an expansion (over the long term) – but there is ALWAYS unemployment  Relationship between aggregate output (GDP) and unemployment is inverse

6.  Because prices have kept pace with (and in some areas exceeded) wage gains in last 40 years, there has been little impact on standard of living  Inflation is an increase in overall price level; deflation is its opposite  Inflation causes increased spending; deflation causes increased savings – both have negative impacts, so price stability is a goal of macroeconomics

7.  Long-run economic growth is accomplished gradually; GDP grows a few percent per year at most.  Rule of 70 is used to determine how many years it takes for GDP to double at its current rate of growth  Rule of 70 can only be applied to positive growth rates

8. Chart of Inflation 2011-2013 YearJanFebMarAprMayJunJulAugSepOctNovDecAve 20131.62.01.51.11.41.82.01.5 20122.9 2.72.31.7 1.41.72.02.21.81.72.1 20111.62.12.73.23.6 3.83.93.53.43.03.2