1. Long-Run Economic Growth and Business Cycles: Before the Great Panic Potential Real GDP Potential GDP Actual GDP Post – World War II Steady growth with two serious slumps: 1974-55 (oil shock and stagflation) 1980-82 (Volcker Disinflation). 1982 – 2007: The Great Moderation

2. The Business Cycle Some Basic Business Cycle Definitions

3. The Great Panic vs. Recession of 2001

4. Who Decides if the Economy Is in a Recession? Making the Connection PEAKTROUGH LENGTH OF RECESSION July 1953May 195410 months August 1957April 19588 months April 1960February 196110 months December 1969November 197011 months November 1973March 197516 months January 1980July 19806 months July 1981November 198216 months July 1990March 19918 months March 2001November 20018 months December 2007Ongoing21 months+

5. The Effect of the 2001 Recession on the Inflation Rate The Effect of the Business Cycle on the Inflation Rate What Happens during a Business Cycle?

6. Inflation and the Business Cycle: The Great Panic in Perspective

7. The Effect of the Business Cycle on the Inflation Rate: Not Counting the Great Panic What Happens during a Business Cycle?

8. The Effect of the Business Cycle on the Unemployment Rate What Happens during a Business Cycle?

9. Unemployment Rate: Great Panic vs. Recession of 2001

10. Duration of Unemployment:Great Panic vs. Recession of 2001

11. The Effect of the Business Cycle on the Unemployment Rate: Not Counting the Great Panic What Happens during a Business Cycle?

12. FIGURE 9.12 Fluctuations in Real GDP, 1900–2006 Recessions Have Been Milder and the Economy Has Been More Stable Since 1950: The Great Panic Doesn’t Compare with the Great Depression of the 1930s and the WWII Boom and Demobilization Slump What Happens during a Business Cycle?

13. Recessions Have Been Milder and the Economy Has Been More Stable Since 1950 The Business Cycle Has Become Milder PERIOD AVERAGE LENGTH OF EXPANSIONS AVERAGE LENGTH OF RECESSIONS 1870-190026 months 1900-195025 months19 months 1950-200161 months9 months What Happens during a Business Cycle?

14. The increasing importance of services and the declining importance of goods. unemployment insurance and other government transfer programs that provide funds to the unemployed. Active federal government policies to stabilize the economy. The Business Cycle Why Is the Economy More Stable? BIG Government Automatic stabilizers