Tracking the Business Cycle

Flashcards on Tracking the Business Cycle

Annualized rate

Data converted to the rate that would occur if the same rate had continued throughout the year.

Business cycle

Short-term fluctuations in economic activity. Reflects the tendency for actual output to deviate from potential output.

Comovement

Many economic variables move up and down together over the business cycle

Expansion

A period of rising economic activity.

Lagging indicators

Variables that tend to follow business cycle movements with a bit of a delay.

Leading indicators

Variables that tend to predict the future path of the economy.

Okun’s rule of thumb

For every percentage point that actual output is less than potential output, the unemployment rate will be around half a percentage point higher.

Output gap

Measures how far GDP is from its potential. (Actual output - Potential output) / Potential output × 100

Peak

A high point in economic activity.

Persistence

The state of the economy this year is closely related to conditions next year.

Potential output

The level of output that occurs when all resources are fully employed.

Recession

A period of falling economic activity.

Revisions

Updates to earlier estimates of macroeconomic data.

Seasonally adjusted

Data stripped of predictable seasonal patterns.

Trough

A low point in economic activity.