Step 7: Let's get down to business! Or to the business cycle, at least. (Start of Unit 2)

Stages of the Business Cycle

The red arrows denote a period of decreasing real GDP, while the blue arrows denote the opposite.

-Each business cycle is measured from trough to trough
-We do not know what stage we are in until it has passed, making peak and trough meaningless
-Each cycle is roughly 6 month units or 2 quarters

Expansionary (growth)

-real output in the economy is increasing and where unemployment rate is declining
-the bulk of a cycle

Peak

-real output is at its highest point
-means things can only go downhill from there

Contractionary (a.k.a. recession)

-real output in the economy is decreasing and where the unemployment rate is rising
-if a recession loses more than 10% of real GDP, then it is classified as a depression
-last about 18 months

Trough

-where you reach your lowest point of real GDP
-means the end of a recession