The paper "Current State of American Economy in Terms of Business Cycles " is a perfect example of a macro & microeconomics case study. This paper seeks to assess the state of the US economy by looking at the business cycle. A business cycle simply comprises a period of expansion and contraction. The change from contraction to expansion is termed as a trough while the move from expansion to contraction is called a peak. Changes in the business cycle usually take place in the long-run period by tracking full-employment capabilities.
The long-run trend shows the amount that an economy can produce when all resources are employed. The divergence of actual real GDP from the long-run trend of potential real GDP is the basis of the business cycle. The business cycle is further understood by examining the aggregate expenditure model through analysis of current GDP, unemployment, consumption, and investment data. Peak, Contraction, and Trough National Bureau of Economic Research of 2001 determined march 2001 as a peak period in the US business cycle. This marked the end of the expansion that began in March 1991 to its peak in March 2001.
This period also signifies the beginning of contraction or rather a recession. Concisely, the recession is a period of declining economic activity and is indicated by a decreasing real GDP. Contraction often lasts for about a year. However, some will last for six months or eighteen months. It is vital to realise that one of the longest contractions was during the Great Depression, which lasted close to four years. The committee within the National Bureau of Economic Research, NBER, is vested with the responsibility to study business cycles in the United States thus determines when the economy is undergoing recession or expansion.
NBER defines a recession as a recurring period of decline in economic activity i. e. total output, income, employment, and trade, which last for more than six months. This decline in economic activity is accompanied by a contraction in various sectors of the economy.
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