4.1 The business cycle
4.1.1 Basic perspectives on stability of the economy
4.1.2 Fluctuations and trends in nominal and real GDP
Activities
The GDP Deflator
- Read this overview of the GDP deflator.
John Petroff's "Macroeconomics, Chapter 7: Classical-Keynesian Controversy"
- Read this chapter to learn about some of the differences among various schools of thought with respect to the role of government, the nature of adjustments in equilibrium, the level of unemployment, and so forth. Those perspectives can affect the timing and effectiveness of government actions or inactions.
John Petroff's "Macroeconomics, Chapter 7 Quiz: Classical-Keynesian Controversy"
- Click the "Review Quiz" link at the bottom of the page and follow the instructions to take the quiz.
Bureau of Economic Analysis: "Gross Domestic Product"
- Download and examine this table, which contains statistics on various components of the GDP from 2013 to 2015 broken down by quarter. Observe how the United States has gone through growth and contraction at various points during this time period.
Each quarter the BEA produces an estimate of the annual GDP for that year. As the year progresses their estimate of the GDP becomes better and more refined. The fourth quarter estimate is the best estimate, although that number is modified in the following year, as "actual" numbers become available for the previous year.
You will note that for fourth quarter of 2014, the GDP is given as "17,615.9." The numbers in this table are expressed in Billions of US Dollars. What it means in words is 17 trillion, 615 billion, 900 million dollars. The US GDP today is heading for 18 trillion dollars.
When you search Google for this information you will see slight differences from the numbers reported on various sites to that of the BEA. This slight difference happens because other sites reconcile/modify quarterly estimates to arrive at an annual estimate of GDP, while the BEA just reports quarterly estimates of the annual GDP.
4.1.2.1 Phases of Business Cycle
Activities
Wikibooks: "Macroeconomics: Business Cycle"
- Read this article to learn about the business cycle and the four phases that help define this cycle. Real GDP varies over time, and the business cycle describes the pattern of its fluctuations.
4.1.2.2 The Great Depression
4.1.2.3 Occasional need for government intervention
Many consider the federal government to be a lender of last resort. The Great Depression is partly the consequence of many factors including, but not limited to, common thinking in the 1920s that government has no role in managing the economy, the absence of a division of the economy into microeconomics and macroeconomics, and the lack of awareness that equilibrium can occur alongside unemployment and business cycles.
Activities
MIT: Roberto Rigobon's "Applied Macro- and International Economics: Fiscal Multiplier"
- Read these lecture notes, which provide a foundation for studying fiscal policy - i.e., managing government taxing and spending - and monetary policy, or managing banking system, money markets, and interest rates. Those policies are presented in Unit 5 and Unit 6. The common element across those two policies is that the outcome is a multiple of the initial amount of change.
