![Page 1: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/1.jpg)
ECON3102-005Chapter 3: Business Cycle
Measurement
Neha Bairoliya
Spring 2014
![Page 2: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/2.jpg)
Regularities in GDP Fluctuations
Business Cycles are fluctuations about trend in real GDP.
• The turning points in thedeviations of real GDP fromtrend are peaks and troughs.
• Persistent positive deviationsfrom trend are booms andpersistent negative deviationsfrom trend are recessions.
• The amplitude of the businesscycle is the maximum deviationfrom trend.
• The frequency of the businesscycle is the number of peaks inRGDP that occur per year.
![Page 3: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/3.jpg)
Regularities in GDP Fluctuations
Business Cycles are fluctuations about trend in real GDP.
• The turning points in thedeviations of real GDP fromtrend are peaks and troughs.
• Persistent positive deviationsfrom trend are booms andpersistent negative deviationsfrom trend are recessions.
• The amplitude of the businesscycle is the maximum deviationfrom trend.
• The frequency of the businesscycle is the number of peaks inRGDP that occur per year.
![Page 4: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/4.jpg)
Regularities in GDP Fluctuations
Business Cycles are fluctuations about trend in real GDP.
• The turning points in thedeviations of real GDP fromtrend are peaks and troughs.
• Persistent positive deviationsfrom trend are booms andpersistent negative deviationsfrom trend are recessions.
• The amplitude of the businesscycle is the maximum deviationfrom trend.
• The frequency of the businesscycle is the number of peaks inRGDP that occur per year.
![Page 5: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/5.jpg)
Regularities in GDP Fluctuations
Business Cycles are fluctuations about trend in real GDP.
• The turning points in thedeviations of real GDP fromtrend are peaks and troughs.
• Persistent positive deviationsfrom trend are booms andpersistent negative deviationsfrom trend are recessions.
• The amplitude of the businesscycle is the maximum deviationfrom trend.
• The frequency of the businesscycle is the number of peaks inRGDP that occur per year.
![Page 6: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/6.jpg)
Regularities in GDP Fluctuations
Business Cycles are fluctuations about trend in real GDP.
• The turning points in thedeviations of real GDP fromtrend are peaks and troughs.
• Persistent positive deviationsfrom trend are booms andpersistent negative deviationsfrom trend are recessions.
• The amplitude of the businesscycle is the maximum deviationfrom trend.
• The frequency of the businesscycle is the number of peaks inRGDP that occur per year.
![Page 7: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/7.jpg)
Irregularities in GDP Fluctuations
• The fluctuations in GDP abouttrend are quite choppy.
• There is no regularity in theamplitude of fluctuations in realGDP about trend.
• There is no regularity in thefrequency of fluctuations in realGDP about trend.
![Page 8: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/8.jpg)
Irregularities in GDP Fluctuations
• The fluctuations in GDP abouttrend are quite choppy.
• There is no regularity in theamplitude of fluctuations in realGDP about trend.
• There is no regularity in thefrequency of fluctuations in realGDP about trend.
![Page 9: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/9.jpg)
Irregularities in GDP Fluctuations
• The fluctuations in GDP abouttrend are quite choppy.
• There is no regularity in theamplitude of fluctuations in realGDP about trend.
• There is no regularity in thefrequency of fluctuations in realGDP about trend.
![Page 10: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/10.jpg)
Irregularities in GDP Fluctuations
• The fluctuations in GDP abouttrend are quite choppy.
• There is no regularity in theamplitude of fluctuations in realGDP about trend.
• There is no regularity in thefrequency of fluctuations in realGDP about trend.
![Page 11: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/11.jpg)
So, is there any hope of anticipating businesscycles?
• While short-term forecasting isrelatively easy (sometimes)
• long-term forecasting is nearlyimpossible.
• This is why we say thatbusiness cycles areunpredictable.
![Page 12: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/12.jpg)
So, is there any hope of anticipating businesscycles?
• While short-term forecasting isrelatively easy (sometimes)
• long-term forecasting is nearlyimpossible.
• This is why we say thatbusiness cycles areunpredictable.
![Page 13: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/13.jpg)
So, is there any hope of anticipating businesscycles?
• While short-term forecasting isrelatively easy (sometimes)
• long-term forecasting is nearlyimpossible.
• This is why we say thatbusiness cycles areunpredictable.
![Page 14: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/14.jpg)
So, is there any hope of anticipating businesscycles?
• While short-term forecasting isrelatively easy (sometimes)
• long-term forecasting is nearlyimpossible.
• This is why we say thatbusiness cycles areunpredictable.
![Page 15: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/15.jpg)
Other Macro Indicators
• Macroeconomic variables often fluctuate together in patterns thatexhibit strong regularities. These patterns are known ascomovements.
• To identify comovements we often rely in observation of thevariables graphs.
Generally, graphs of macroeconomic variables come in two differentflavors:
• Scatter plots
• Time-series plots
![Page 16: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/16.jpg)
Other Macro Indicators
• Macroeconomic variables often fluctuate together in patterns thatexhibit strong regularities. These patterns are known ascomovements.
• To identify comovements we often rely in observation of thevariables graphs.
Generally, graphs of macroeconomic variables come in two differentflavors:
• Scatter plots
• Time-series plots
![Page 17: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/17.jpg)
Time-series Plots
• Example: variables X and Y
• Variable values are on the Y-axis. Time is on the X-axis.
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Time-series Plots
• Example: variables X and Y
• Variable values are on the Y-axis. Time is on the X-axis.
![Page 19: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/19.jpg)
Scatter Plots
• Example: variables X and Y
• One variable is on the X-axis, and the other on the Y-axis.
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Scatter Plots
• Example: variables X and Y
• One variable is on the X-axis, and the other on the Y-axis.
![Page 21: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/21.jpg)
Correlation With Real GDP
We are mostly interested in how individual economic variables comovewith GDP.
• An economic variable is procyclical if its deviations from trend arepositively correlated with deviations from trend in RGDP.
• An economic variable is countercyclical if its deviations from trendare negatively correlated with deviations from trend in RGDP.
• Variables which are neither procyclical nor countercyclical are calledacyclical.
![Page 22: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/22.jpg)
Correlation With Real GDP
We are mostly interested in how individual economic variables comovewith GDP.
• An economic variable is procyclical if its deviations from trend arepositively correlated with deviations from trend in RGDP.
• An economic variable is countercyclical if its deviations from trendare negatively correlated with deviations from trend in RGDP.
• Variables which are neither procyclical nor countercyclical are calledacyclical.
![Page 23: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/23.jpg)
Correlation With Real GDP
We are mostly interested in how individual economic variables comovewith GDP.
• An economic variable is procyclical if its deviations from trend arepositively correlated with deviations from trend in RGDP.
• An economic variable is countercyclical if its deviations from trendare negatively correlated with deviations from trend in RGDP.
• Variables which are neither procyclical nor countercyclical are calledacyclical.
![Page 24: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/24.jpg)
Correlation With Real GDP
We are mostly interested in how individual economic variables comovewith GDP.
• An economic variable is procyclical if its deviations from trend arepositively correlated with deviations from trend in RGDP.
• An economic variable is countercyclical if its deviations from trendare negatively correlated with deviations from trend in RGDP.
• Variables which are neither procyclical nor countercyclical are calledacyclical.
![Page 25: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/25.jpg)
Correlation With Real GDP (cont’d)
• If a macro variable helps in predicting the future path of RGDP, wesay call it a leading variable.
• If RGDP helps in predicting the future path of the variable, it is alagging variable.
• Variables which neither lead nor lag RGDP are called coincidentvariables.
![Page 26: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/26.jpg)
Correlation With Real GDP (cont’d)
• If a macro variable helps in predicting the future path of RGDP, wesay call it a leading variable.
• If RGDP helps in predicting the future path of the variable, it is alagging variable.
• Variables which neither lead nor lag RGDP are called coincidentvariables.
![Page 27: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/27.jpg)
Correlation With Real GDP (cont’d)
• If a macro variable helps in predicting the future path of RGDP, wesay call it a leading variable.
• If RGDP helps in predicting the future path of the variable, it is alagging variable.
• Variables which neither lead nor lag RGDP are called coincidentvariables.
![Page 28: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/28.jpg)
Another Measure
Volatility: a measure of cyclical variability is the standard deviation of thepercentage deviations from trend.
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Example: Imports and RGDP (scatter plot)
![Page 30: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/30.jpg)
Example: Imports and RGDP (time-seriesplot)
• Imports are procyclical and more volatile than RGDP.
![Page 31: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/31.jpg)
Example: Imports and RGDP (time-seriesplot)
• Imports are procyclical and more volatile than RGDP.
![Page 32: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/32.jpg)
Model and Behavior of Key MacroeconomicVariables
If we are to construct a macroeconomic model which helps us understandbusiness cycles and the economy, itd better be the case that it is able toreplicate the regularities and comovements that we observe in RGDP andits components!
• Components of GDP: consumption and investment.
• Nominal variables: price level and money supply.
• Labor market variables: employment, real wage, average laborproductivity.
![Page 33: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/33.jpg)
Model and Behavior of Key MacroeconomicVariables
If we are to construct a macroeconomic model which helps us understandbusiness cycles and the economy, itd better be the case that it is able toreplicate the regularities and comovements that we observe in RGDP andits components!
• Components of GDP: consumption and investment.
• Nominal variables: price level and money supply.
• Labor market variables: employment, real wage, average laborproductivity.
![Page 34: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/34.jpg)
Model and Behavior of Key MacroeconomicVariables
If we are to construct a macroeconomic model which helps us understandbusiness cycles and the economy, itd better be the case that it is able toreplicate the regularities and comovements that we observe in RGDP andits components!
• Components of GDP: consumption and investment.
• Nominal variables: price level and money supply.
• Labor market variables: employment, real wage, average laborproductivity.
![Page 35: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/35.jpg)
Model and Behavior of Key MacroeconomicVariables
If we are to construct a macroeconomic model which helps us understandbusiness cycles and the economy, itd better be the case that it is able toreplicate the regularities and comovements that we observe in RGDP andits components!
• Components of GDP: consumption and investment.
• Nominal variables: price level and money supply.
• Labor market variables: employment, real wage, average laborproductivity.
![Page 36: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/36.jpg)
Consumption and GDP
• Procyclical orcountercyclical?
• Procyclical
• Lead or lag?
• Coincident
• More volatilethan GDP?
• No
![Page 37: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/37.jpg)
Consumption and GDP
• Procyclical orcountercyclical?
• Procyclical
• Lead or lag?
• Coincident
• More volatilethan GDP?
• No
![Page 38: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/38.jpg)
Consumption and GDP
• Procyclical orcountercyclical?
• Procyclical
• Lead or lag?
• Coincident
• More volatilethan GDP?
• No
![Page 39: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/39.jpg)
Consumption and GDP
• Procyclical orcountercyclical?
• Procyclical
• Lead or lag?
• Coincident
• More volatilethan GDP?
• No
![Page 40: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/40.jpg)
Investment and GDP
• Procyclical orcountercyclical?
• Procyclical
• Lead or lag?
• Coincident
• More volatilethan GDP?
• Yes
![Page 41: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/41.jpg)
Investment and GDP
• Procyclical orcountercyclical?
• Procyclical
• Lead or lag?
• Coincident
• More volatilethan GDP?
• Yes
![Page 42: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/42.jpg)
Investment and GDP
• Procyclical orcountercyclical?
• Procyclical
• Lead or lag?
• Coincident
• More volatilethan GDP?
• Yes
![Page 43: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/43.jpg)
Investment and GDP
• Procyclical orcountercyclical?
• Procyclical
• Lead or lag?
• Coincident
• More volatilethan GDP?
• Yes
![Page 44: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/44.jpg)
Price and GDP
• Procyclical orcountercyclical?
• Countercyclical
• Lead or lag?
• Coincident
• More volatilethan GDP?
• No
![Page 45: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/45.jpg)
Price and GDP
• Procyclical orcountercyclical?
• Countercyclical
• Lead or lag?
• Coincident
• More volatilethan GDP?
• No
![Page 46: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/46.jpg)
Price and GDP
• Procyclical orcountercyclical?
• Countercyclical
• Lead or lag?
• Coincident
• More volatilethan GDP?
• No
![Page 47: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/47.jpg)
Price and GDP
• Procyclical orcountercyclical?
• Countercyclical
• Lead or lag?
• Coincident
• More volatilethan GDP?
• No
![Page 48: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/48.jpg)
Money Supply and GDP
• Procyclical orcountercyclical?
• Procyclical
• Lead or lag?
• Leading
• More volatilethan GDP?
• No
![Page 49: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/49.jpg)
Money Supply and GDP
• Procyclical orcountercyclical?
• Procyclical
• Lead or lag?
• Leading
• More volatilethan GDP?
• No
![Page 50: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/50.jpg)
Money Supply and GDP
• Procyclical orcountercyclical?
• Procyclical
• Lead or lag?
• Leading
• More volatilethan GDP?
• No
![Page 51: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/51.jpg)
Money Supply and GDP
• Procyclical orcountercyclical?
• Procyclical
• Lead or lag?
• Leading
• More volatilethan GDP?
• No
![Page 52: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/52.jpg)
Employment and GDP
• Procyclical orcountercyclical?
• Procyclical
• Lead or lag?
• Lagging
• More volatilethan GDP?
• No
![Page 53: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/53.jpg)
Employment and GDP
• Procyclical orcountercyclical?
• Procyclical
• Lead or lag?
• Lagging
• More volatilethan GDP?
• No
![Page 54: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/54.jpg)
Employment and GDP
• Procyclical orcountercyclical?
• Procyclical
• Lead or lag?
• Lagging
• More volatilethan GDP?
• No
![Page 55: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/55.jpg)
Employment and GDP
• Procyclical orcountercyclical?
• Procyclical
• Lead or lag?
• Lagging
• More volatilethan GDP?
• No
![Page 56: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/56.jpg)
Average Labor Productivity and GDP
• Procyclical orcountercyclical?
• Procyclical
• Lead or lag?
• Coincident
• More volatilethan GDP?
• No
![Page 57: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/57.jpg)
Average Labor Productivity and GDP
• Procyclical orcountercyclical?
• Procyclical
• Lead or lag?
• Coincident
• More volatilethan GDP?
• No
![Page 58: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/58.jpg)
Average Labor Productivity and GDP
• Procyclical orcountercyclical?
• Procyclical
• Lead or lag?
• Coincident
• More volatilethan GDP?
• No
![Page 59: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/59.jpg)
Average Labor Productivity and GDP
• Procyclical orcountercyclical?
• Procyclical
• Lead or lag?
• Coincident
• More volatilethan GDP?
• No
![Page 60: ECON3102-005 Chapter 3: Business Cycle MeasurementBusiness Cycles are uctuations about trend in real GDP. The turning points in the deviations of real GDP from trend are peaks and](https://reader035.vdocuments.mx/reader035/viewer/2022062922/5f08eb037e708231d4245ad4/html5/thumbnails/60.jpg)
Summary
Our models should be able to replicate the following table.