1. Professor K.D. Hoover, Econ 210D Topic 2 Spring 2015 1 Econ 210D Intermediate Macroeconomics Spring 2015 Professor Kevin D. Hoover Topic 2 Trends and Cycles

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5. 5 Computing a Centered Moving-Average Trend Center

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7. 7 Original and Detrended Series

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9. 9 Definition of the Business Cycle BUSINESS CYCLE – the alternation in the state of the economy of a roughly consistent periodicity and with rough coherence between different measures of the economy

10. Professor K.D. Hoover, Econ 210D Topic 2 Spring 2015 10 Anatomy of the Business Cycle Peak = the point of locally greatest economic activity Trough = the point of locally lowest economic activity Period of rising from trough to peak = boom, expansion, recovery Period of falling from peak to trough = slump, recession, contraction Complete Cycle = period from peak to peak or trough to trough

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12. Professor K.D. Hoover, Econ 210D Topic 2 Spring 2015 12 Miscellaneous Business-cycle Terminology Depression = a large recession Growth Recession = a period of growth that is positive, yet so slow, so that the unemployment rate rises

13. Professor K.D. Hoover, Econ 210D Topic 2 Spring 2015 13 Dating the Business Cycle Two-quarter Rule: recession is two consecutive quarters of negative growth in real GDP NBER Definition : a recession = “a recurring period of decline in total output, income, employment, and trade, usually lasting from six months to a year, and marked by widespread contractions in many sectors of the economy.”

14. Professor K.D. Hoover, Econ 210D Topic 2 Spring 2015 14 Business-cycle Indicators - 1 coincident = reaches peaks and troughs at the same time as the business cycle as a whole. leading = reaches its peak ahead of the business-cycle peak; and its trough ahead of the business-cycle trough; lagging = reaches its peak behind the business-cycle peak; and its trough behind the business-cycle trough.

15. Professor K.D. Hoover, Econ 210D Topic 2 Spring 2015 15 Business-cycle indicators – 2 mixed indicators = different incidence relative to business-cycle peaks and troughs. acyclical indicators = no particular stable relationship to business cycle.

16. Professor K.D. Hoover, Econ 210D Topic 2 Spring 2015 16 Components of the Indicator Indices

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20. Professor K.D. Hoover, Econ 210D Topic 2 Spring 2015 20 END of Topic 2 Next Topic: 3. Long-term Economic Growth