Assignment:
Part 1
Have stabilization policies reduced the severity of business cycles?
Macroeconomics grew out of the attempts to explain the recurrent fluctuations in economic activity; that is the premise of business cycle theory. The length of adjustment time and the economic impact of that adjustment is the subject of much debate among economists. Economists have proposed many policies to reduce the fluctuations in real gross domestic product due to the business cycle.
The Business Cycle Dating Committee of The National Bureau of Economic Research is the group that defines when the U.S. economy is in a recession or expansion period. The primary determinant of economic activity is real GDP. The committee uses the following definitions: "A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough. Between trough and peak, the economy is in an expansion. Expansion is the normal state of the economy; most recessions are brief and they have been rare in recent decades."
Your key questions for this assignment are:
• Provide a brief (one paragraph) overview of this week's material.
• What is the business cycle?
• List and describe the recessions that have occurred since 1949.
• Examine each of those recessions and explain which recession was the most severe and which one was the least severe.
• Calculate the longest time between recessions and identify the recession at the beginning and the end of that longest period. Have the severity of recessions decreased over the post- war period?
• If a change in the severity of recessions is evident, why do you think this is?
The Business Cycle Dating Committee of The National Bureau of Economic Research is the group that defines when the U.S. economy is in a recession or expansion period. The primary determinant of economic activity is real GDP. The committee uses the following definitions: "A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough. Between trough and peak, the economy is in an expansion. Expansion is the normal state of the economy; most recessions are brief and they have been rare in recent decades."
To investigate the answers to the questions, go to The National Bureau of Economic Research (NBER) website to identify when business cycles occurred during the post- World War II period.
The website is: www.nber.org/cycles.html.
The relationship between the real gross domestic product and the potential GDP is a good measure of the performance of the economy relative to the potential. Go to The St. Louis Federal Reserve web site and use the data on real GDP and potential GDP to answer the questions about the severity of recessions.
Potential GDP estimates: https://research.stlouisfed.org/fred2/series/GDPPOT Real GDP https://research.stlouisfed.org/fred2/series/GDPC1/
Measures of severity might be the ratio of actual to potential real GDP, how much GDP fell, how long it fell, and how quickly it fell.
If you wanted to look at various business cycle theories, you can go to the following website: https://www.newschool.edu/nssr/het/schools/business.htm
Your final product will be a paper that:
• Addresses each of the topic/questions above in total.
• Is APA fortatted.
• The body is to be 2 pages minimum.
The requirements for your assignment are:
1. Answer each question fully
2. Define the overall subject of each question.
3. Cite at least three (3) resources from this week's materials.
Part 2
Inflation, International Trade and Capital Flows, and the Aggregate Demand/Aggregate Supply Model
We begin by showing how to combine prices of individual goods and services to create a measure of overall inflation. We will also discuss the historical and recent experience of inflation, both in the United States and in other countries around the world. Then, we will start to examine the balance of trade in more detail, by looking at some patterns of trade balances in the United States and around the world.
We will explore the intimate connection between international flows of goods and services and international flows of financial capital, which to economists are really just two sides of the same coin. We close this unit with an introduction the macroeconomic model of aggregate supply and aggregate demand, how the two interact to reach a macroeconomic equilibrium, and how shifts in aggregate demand or aggregate supply will affect that equilibrium.
Objectives:
• Calculate the annual rate of inflation.
• Explain and use index numbers and base years when simplifying the total quantity spent over a year for products.
• Discuss merchandise trade balance, current account balance, and unilateral transfers.
• Examine both Say's Law and Keynes' Law, and determine whether it applies in the short run or the long run.
Articles, Websites, and Videos:
Is there value in building global relationships?
• Lehmann, S. M. (2014). The value of building global relationships. New Hampshire Business Review, 36(17), 14.
Use this cost of living calculator to respond to the discussion board assignment for this unit.
• Cost of Living Calculator
The four resources below may be used to complete the assignment for this unit.
• US Business Cycle Expansions and Contractions. Cambridge, MA: The National Bureau of Economic Research [online].
• FRED Economic Data. (n.d.). Real Gross Domestic Product.Federal Reserve Bank of St. Louis.
• FRED Economic Data. (n.d.). Real Potential Gross Domestic Product.Federal Reserve Bank of St. Louis.
• Ecoterms. (2015). Real Business Cycle Theory [website].
Supplemental Resources:
Use this site to augment your readings for the week regarding all things associated with inflation.
• Inflation Data
Use these sites to help augment any research you may need for this week's subjects. It may be helpful to add a bookmark for each site in your internet browser.
• The Brookings Institution
• The Economist- Economics
• Forbes- Economics & Finance
• Investopedia
• Bloomberg View- Economics
• The White House Administration, Council of Economic Advisors
• World Economic Forum
• The Heritage Foundation