01/24/14 Business Cycle/ Circular Flow

• Cycle --> Trough to trough
• Average cycle is six years
• Recessions last about 14 months.  The bulk of a cycle is a growth stage.
• Peak: Trough are meaningless because we never know we are in one until it's over.
• If a recession loses more than 10% of real GDP, then it is considered a depression. 
• Trough's mean the end of a recession.

• Expansion- Real output in the economy is increasing and the unemployment is declining.
• Peak- Real output (GDP) is at the highest point of the business cycle.
• Contraction/recession phase- Real output in the economy is declining and the unemployment rate is decreasing. 
• Trough- Lowest point of real GDP that is reached during a business cycle.