Unit I (Business Cycles)

• cycle occurs from trough to trough
• average cycle is 5 to 7 years
• recessions last about 14 months 
• peaks/ troughs are meaningless because we never know we are in one until it is over  
• trough means the end of a recession
• if a recession loses more than 10% of real GDP = depression 

• Peak:  highest point of real GDP

-exhibits greatest amount of spending and lowest unemployment  

-inflation becomes a problem 

• Expansion:  real GDP increases 

-"recovery phase" as a result of spending increases and unemployment decreases

• Contraction/ Recession:  real GDP declines

-increases unemployment

-reduction of spending

• Trough:  lowest point in the real GDP