Macroeconomics Paper

2140 Words Oct 31st, 2011 9 Pages
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Essay Sample
Macroeconomics Paper Lorelei Michelle Bullock Rasmussen College Author Note This research is being submitted on May 25, 2011, for the Macroeconomics course at Rasmussen College by Lorelei Michelle Bullock. Gross Domestic Product (GDP) The United States economy completed its sixth consecutive quarter of recovery at the end of 2010, following the longest recession since the Great Depression. The recovery began in the last months of 2009 and continued in the first half of 2010. However

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What GDP represents and economic production and growth, has a large impact on nearly everyone within that economy. For example, when the economy is healthy, you will typically see low unemployment and wage increases as businesses demand labor to meet the expanding economy.

A change in GDP, whether up or down, usually has a significant effect on the stock market. So it is easy to understand why a bad economy usually means lower profits for companies, which in turn means lower stock prices. A common worry for investors is negative GDP growth, which is one of the factors economists use to determine whether an economy is in a recession.

Business Cycles

Most business cycles have last three to five years from peak to peak. The average duration of an expansion is 44.8 months and the average duration of a recession is 11 months. The business cycle is the periodic but irregular up-and-down movements in economic activity, measured by fluctuations in real GDP and other macroeconomic variables. A business cycle is not a regular, predictable, or repeating phenomenon. Its timing is random and, to a large degree, unpredictable. A business cycle is identified as a sequence of four phases: peak (when GDP reaches its peak and starts to fall), recession (when GDP is falling over time), trough (point in time), and recovery/expansion (a GDP that has never been reached before).

Business Fixed Investment

The definition of business fixed investment is the
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