Chapter 41
How to Measure Instability
LEARNING OBJECTIVES
Explain how to find the peaks and troughs of the business cycle.
OUTLINE OF CHAPTER
I. Dating Business Cycle Peaks and Troughs
Nine Stages
KEY TERMS
Amplitude
the amount of rise in the expansion and
the amount of decline in the contraction
business cycle
the rise of the economy from trough to peak, as well as the following decline from peak to trough
business cycle peak
lowest point of the business cycle as measured by business indicators
the average of an economic series for one whole cycle
the original data in a stage divided by the cycle base
ANSWERS TO END OF CHAPTER REVIEW QUESTIONS
Explain how to find the peaks and troughs of the business cycle.
1. How are the peaks and troughs of the business cycle measured?
2. What is an expansion? What is a contraction?
contraction is the period from the peak to the final trough.
3. How does unemployment behave over the business cycle?
4. What happens to capacity utilization over the business cycle?
Explain how to measure the path of any economic series over the cycle.
5. What is a cycle base? Explain how to find a cycle base.
6. What is a cycle relative? Explain how to find a cycle relative.
7. Explain how to calculate the percentage of expansion and the percentage of contraction?
8. Name one economic series that rises in every expansion and falls in every contraction.
Explain this behavior.
Capacity utilization rises during an expansion and falls during a contraction, because an
9. Name one economic series that falls in expansion and rises in contraction. Explain this
behavior.
Describe measuring how much an economic series rises from trough to peak and falls from
peak to trough.
10. What is a cycle relative and how is it calculated?