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Grade 12 Economics Business Cycles Notes
Important!
- Analysis and explanation of business cycles, and how they are used in forecasting.
- Know the types of business cycles and what happens in the economy over a few years.
- Understanding the different phases of a business cycle can help individuals make lifestyle decisions, investors make financial decisions and government make appropriate policy decisions.
The composition and features of business cycles Key concepts in a table format
| Term | Description |
|---|---|
Business Cycle | Successive periods of increasing and decreasing economic activity / a time series showing repeated increasing and decreasing economic activity/ the recurrent (not periodic) pattern of expansion and contraction in the level of economic activity. Business cycle refers to the changes in the economy that produces a cyclical pattern that repeats itself every three to five years. It is also known as the economic cycle. |
Recovery | When GDP begins to increase following a contraction and a trough in the business cycle; an economy is considered in recovery until real GDP returns to its long-run potential level. |
Prosperity | Increased output and excessive economic activities following the recovery / economic growth rate on a year – to -year basis is positive, at an increasing rate. |
A period between the trough and peak including both recovery and prosperity. | |
Expansion | A period between the trough and peak including both recovery and prosperity. |
Recession | A negative economic growth for at least two successive quarters/ a decline in economic activity lasting more than a few months. |
| Depression | Continuous decrease in the production output and economic activities. |
Contraction | A period between the peak and trough including both recession and depression. |
Peak | The highest point between the end of an economic expansion (end of prosperity) and the start of a contraction (start of recession). |
Boom | The period immediately before and through the upper turning point is known as the boom. |
Real business cycle | An actual business cycle is obtained when the effects of irregular events, seasons and long-term growth trend are removed from the time series data. |
Trough | The lowest point between the end of an economic contraction (end of depression) and the start of a expansion (start of recovery). |
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