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11 Cards in this Set

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Business cycles refer to the...
rise and fall of economic activity relative to its long-term growth trend.
Business cycles are typicall comprised of...
Expansionary Phase
Peak
Contractionary Phase
Trough
Recovery Phase
Expansionary Phase
Business cycle phase characterized by rising economic activity
growth
economic activity is rising above its long-term growth trend
Peak
Business cycle-high point of economic activity.
Marks the end of expansionary phase
Firm profits are at their highest level
Firms likely to face capacity constraints and input shortages
Contractionary Phase
Business cycle phase-falling economic activity and growth
Recovery Phase
Business cycle-economic activity begins to increase and return to its long-term growth trend.
Firm profits stabalize
Demand for goods and services begin to rise.
Occurs when the economy experiences negative real econoic growth(declines in national output)
2 consecutive quarters of falling national output.
Excess capacity
resources underutilized
unemployement high
Recession
A very severe recession
Relatively long period of stagnation in business activity and high unemployment
significant excess capacity
Depression
Business cycles result from
shifts in aggregate demand and/or aggregate supply
Illustrates the maxiumum quantity of all goods and services that households, firms, and the government are willing and able to purchase at any given price level.
Shows relationship between total output (real GDP)& price level
Aggregate Demand Curve
Illustrates the maxiumum quantity of all goods and services producers are willing and able to produce at each and every price level
Aggregate Supply Curve