Long-Run Economic Growth and Business Cycles: Before the Great Panic Potential Real GDP Potential...
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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
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Transcript of Long-Run Economic Growth and Business Cycles: Before the Great Panic Potential Real GDP Potential...
Long-Run Economic Growth and Business Cycles: Before the
Great PanicPotential 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
The Business Cycle
The Business Cycle
Some Basic Business Cycle Definitions
The Great Panic vs. Recession of 2001
Who Decides if the Economy Is in a Recession?
Makingthe
Connection
PEAK TROUGHLENGTH OF RECESSION
July 1953 May 1954 10 months
August 1957 April 1958 8 months
April 1960 February 1961 10 months
December 1969 November 1970 11 months
November 1973 March 1975 16 months
January 1980 July 1980 6 months
July 1981 November 1982 16 months
July 1990 March 1991 8 months
March 2001 November 2001 8 months
December 2007 Ongoing 21 months+
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?
Inflation and the Business Cycle: The Great Panic in Perspective
The Effect of the Business Cycle on the Inflation Rate:
Not Counting the Great Panic
What Happens during a Business Cycle?
The Effect of the Business Cycle on the Unemployment Rate
What Happens during a Business Cycle?
Unemployment Rate: Great Panic vs. Recession of 2001
Duration of Unemployment:Great Panic vs. Recession of 2001
The Effect of the Business Cycle on the Unemployment Rate:
Not Counting the Great Panic
What Happens during a Business Cycle?
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?
Recessions Have Been Milder and the Economy Has Been More Stable Since 1950
The Business Cycle Has Become Milder
PERIODAVERAGE LENGTH OF EXPANSIONS
AVERAGE LENGTH OF RECESSIONS
1870-1900 26 months 26 months
1900-1950 25 months 19 months
1950-2001 61 months 9 months
What Happens during a Business Cycle?
• 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
