Notes: Macroeconomics- The Business Cycle & Economic Indicators

by Mrs. Erin Cervi

The Macroeconomic Perspective• Macroeconomics: examines the overall health and growth of the

economy as a whole, concerning itself with the aggregate behavior of consumers & producers.

• What are the macroeconomic goals of the national economy and how do we measure if we are meeting those goals?

• Economic growth national income (GDP) • Stable prices inflation rates/Consumer Price Index (CPI)• High employment (low cyclical unemployment)

employment rates/unemployment rates

• The peak, a high point in economic growth---when GDP stops growing.• It is followed by a contraction—the period between the peak and trough---and is

a period of economic decline.– Recession: 2 consecutive quarters (6 months of negative growth rates)- in the

U.S. it must be classified by the NBER– Depression–MOST SEVERE CONTRACTION. Historical identification that was

used to describe the prolonged and severe recession during the 1930s. • A contraction continues until the lowest point is reached--called a trough.• An expansion follows—period of economic growth

– A recovery occurs as the economy starts expanding again, and prosperity occurs when economic growth exceeds the previous peak.

Different Impact on States

• The Decline: The Geography of a Recession– More up-to-date

• Some States Worse Than Others– The intensity of the business cycle varies from region to

region across the U.S.– A recession hits hardest those regions that produce durable

or manufactured goods or rely on single service industries.• Michigan, California, Florida, Pennsylvania

How do we measure where we are in the business cycle?

• Economic indicators: a set of key economic variables (statistics) that economists use to predict a new phase of the business cycle and identify trends in the economy.