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The Business Cycle

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The Business Cycle The Business Cycle, is what caught Norma’s attention during the Week 4 chapter readings. Business cycles are the ups and downs of economic activity that can take place over several months or sometimes years (McConnell et al., 2009) No one business cycle is exactly the same in terms of their length and intensity. However, all cycles experience the same four phases: peak, recession, trough, and expansion (McConnell et al., 2009). The peak of the business cycle is where “the economy is near or at full employment and the level of real output is at or very close to the economy’s capacity (McConnell et al., 2009, p.521).” What goes up must come down, and that is true for the next phase called the recession distinguished by a period of reduction in total productivity, earnings, and employment lasting six months or more (McConnell et al., 2009). During the trough phase, the economy reaches the lowest levels of output and employment placing them in the middle of a depression (McConnell et al., 2009). Lastly, our present economy is in the midst of an expansion period “in which real GDP, income, and employment rise (McConnell et al., 2009, p.521).” According to the Bureau of Labor and Statistics website (2014), in October of this year, average hourly earnings rose by .01% while unemployment dropped 1.2% since the beginning of the year. The economy’s real GDP also increase by 3.9% in the third quarter of this year according to the Bureau of Economic Analysis website (2014).
References:
U.S. Economic Accounts. (2014, December 5). Retrieved from http://www.bea.gov/index.htm
Employment Situation Summary. (2014, December 5) Retrieved from http://www.bls.gov/news.release/empsit.nr0.htm
McConnell, C. R., Brue, S. L., & Flynn, S. M. (2009). Economics: Principles, problems, and policies (18th ed.). Boston, MA: McGraw-Hill

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