1 / 8

MORE ON THE BUSINESS CYCLE

MORE ON THE BUSINESS CYCLE. EXPANSION – REAL GDP IS RISING PEAK – TOP OF REAL GDP IN CURRENT CYCLE RECESSION – REAL GDP IS FALLING TROUGH – BOTTOM OF REAL GDP IN CURRENT CYCLE CYCLE – ONE COMPLETE EXPANSION, PEAK, RECESSION, AND TROUGH. THE RECENT BUSINESS CYCLE.

adanna
Télécharger la présentation

MORE ON THE BUSINESS CYCLE

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. MORE ON THE BUSINESS CYCLE EXPANSION – REAL GDP IS RISING PEAK – TOP OF REAL GDP IN CURRENT CYCLE RECESSION – REAL GDP IS FALLING TROUGH – BOTTOM OF REAL GDP IN CURRENT CYCLE CYCLE – ONE COMPLETE EXPANSION, PEAK, RECESSION, AND TROUGH

  2. THE RECENT BUSINESS CYCLE

  3. WHAT CAUSES THE “DOWN” PART OF THE BUSINESS CYCLE – RECESSIONS? A SHOCK TO THE SYSTEM BY DEFINTION, A SHOCK IS UNEXPECTED – SO RECESSIONS AREN’T PREDICTABLE THE SHOCK MOVES THE ECONOMY AWAY FROM “EQUILIBRIUM” – LIKE A STRONG WIND KNOCKING YOU DOWN!

  4. ONE OF MOST COMMON SHOCKS – “POPPING” OF AN “INVESTMENT BUBBLE” INVESTORS BID UP A MARKET TO UNSUSTAINABLE LEVELS SOMETHING TRIGGERS A SELL-OFF – TURNS INTO A FULL-SCALE RETREAT EXAMPLES: “TECH BUBBLE” OF LATE 1990- LED TO RECESSION OF 2001 “HOUSING BUBBLE” OF 1997-2007 - LED TO RECESSION OF 2007-2009

  5. THE HOUSING BOOM AND BUST(% CHANGE IN AVERAGE HOUSING PRICE)

  6. DISRUPTION IN SUPPLY OF A KEY INPUT TO THE ECONOMY DISRUPTION IN SUPPLY OF OIL AND CONSEQUENT SIGNIFICANT INCREASE IN ITS PRICE LED TO TWO RECESSIONS IN THE 1970S

  7. ANOTHER REASON FOR RECESSIONS – CHANGE IN LAWS THAT MAKE DOING BUSINESS MORE COSTLY TWO EXAMPLES: BIG JUMP IN TARIFFS IN EARLY 1930S – SOME SAY TURNED A RECESSION INTO A DEPRESSION TAX LAW CHANGES UNFAVORABLE TO COMMERCIAL REAL ESTATE IN LATE 1980S – LED TO RECESSION OF 1990-1991

  8. LAST, RECESSIONS CAN BE DIRECTLY CAUSED BY GOVERNMENT POLICIES EXAMPLE: INFLATION WAS SKY-HIGH IN LATE 1970S (12% ANNUALLY) FED RESERVE HEAD PAUL VOLCKER INCREASED INTEREST RATES, TOOK MONEY OUT OF THE ECONOMY, AND PLUNGED THE ECONOMY INTO A RECESSION – BUT SILVER LINING WAS INFLATION WAS REDUCED

More Related