4.1: The Business Cycle
Read this chapter for an overview of the concepts that are associated with the business cycle. The business cycle provides information on the causes and characteristics of the economic problems associated with unemployment and inflation. Be sure to complete the assessment in this subunit that accompanies this reading.
Click the "Review Quiz" link at the bottom of the page and follow the instructions to take the quiz.
4.1.1: Basic Perspectives on Stability of the Economy
Watch this lecture about Keynesian economics.
Watch this lecture about the risks of Keynesian thinking.
4.1.2: Fluctuations and Trends in Nominal and Real GDP
Read this overview of the GDP deflator.
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.
Click the "Review Quiz" link at the bottom of the page and follow the instructions to take the quiz.
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.
Please attempt this quiz as a way to check your understanding of the components of GDP. You will be asked to apply real numbers to the definitions of GDP and its composite variables you have learned in this course.
Notes:- There is no minimum required score to pass this assessment, and your score on this assessment will not factor into your overall course grade.
- This assessment is designed to prepare you for the Final Exam that will determine your course grade. Upon submission of your assessment you will be provided with the correct answers and/or other feedback meant to help in your understanding of the topics being assessed.
- You may attempt this assessment as many times as needed, whenever you would like.
4.1.2.1: Phases of 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
Read these lecture notes, which provide context for the Great Depression and some commonalities with the recent recession. The first page of these lecture notes provides data on trends in real GDP, bank reserves, and other important variables. You will also gain information about changes in the demand for money and in thinking about the banking system.
Read these lecture notes, which will provide details on changes in various key variables such as prices of assets and consumer goods that occurred during the Great Depression. These lecture notes will provide you with comparisons to the recent recession and the global setting.
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.
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.