Joe Liang

Business Cycle

1 min read

Business cycle diagram 

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    <svg xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink" width="660" height="464" style="width:660px;height:464px;font-family:Asana-Math, Asana;background:transparent;"><g><g><g><text x="321" y="408" style="white-space:pre;stroke:none;fill:rgb(255,255,255);fill-opacity:1;font-size:15px;font-family:Arial, Helvetica, sans-serif;font-weight:400;font-style:normal;dominant-baseline:text-before-edge;text-decoration:none solid rgb(255,255,255);">Time</text></g></g></g><g transform="matrix(0.004363309284747004,-0.9999904807207345,0.9999904807207345,0.004363309284747004,-144.35480701192233,267.3264481556276)"><g><g><text x="31.2265625" y="197.65625" style="white-space:pre;stroke:none;fill:rgb(255,255,255);fill-opacity:1;font-size:15px;font-family:Arial, Helvetica, sans-serif;font-weight:400;font-style:normal;dominant-baseline:text-before-edge;text-decoration:none solid rgb(255,255,255);">real GDP</text></g></g></g></svg>
There are peaks and troughs. On downward sloping periods, there are contractions. If these are over 6 months long, they are considered recessions. Sloping upwards are expansions.

The long term growth trend is described by the dotted line. It is the point of potential GDP.

When GDP = Potential GDP, there is full employment.

Graph View

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