Business Cycle PART TWO
Montāžas Teksta
- The expansion is a period of time when an economy is growing. While, on the other hand, the contraction period is when an economy is declining. Think about it like a line: when it increases, it represents expansion. When it decreases, it represents contraction.
- Well, the peak represents the end of expansion and the beginning of contraction. It is the highest point of the business cycle. Recession is a period of economic decline; followed by a trough. A trough represents the end of contraction. If the business cycle were to continue to decrease, a depression would occur. 2 key indicators for a trough include: GDP rate and unemployment rate. When the GDP rate decreases more than it did during the contraction, it is an indicator of trough. When the unemployment rate starts to increase more, it is also an indicator.
- Okay. I understand those, but what about the other terms?
- You're welcome. Just remember the business cycle always repeats itself. Also, two key indicators of expansion, or contraction, include: the GDP rate and the unemployment rate. If the unemployment rate is high and the GDP is low, it is an indicator of contraction. Vise versa for expansion. For the peak, it would have the same idicators except you would only know when it was the peak when the GDP starts decreasing and the unemployment rate states increasing.
- Ohhh okay thank you that makes more sense now.
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