Economics 2.2.2

business trade cycle and indicators yr 10 2026

leading indicators

types of indicators that signal future events

leading indicators example

bond yields, housing starts

bond yields

bond traders anticipate and speculate trends in the economy

housing starts

reflect confidence and consumer demand

lagging indicators

ones that follows an event and has an ability to confirm that a pattern is occuring

lagging indicators example

unemployment and inflation rate

unemployment rate

if it is rising, indicates that the economy is doing poorly

inflation rate

measures change after they have occurred

coincident indicators

occur at approximately the same time as the conditions signify

coincident indicators example

personal income, GDP

personal income

high personal incomes will coincide with a strong economy

GDP (Gross Domestic Product)

measures the total value of goods and services provided within an economy at the same time those changes are occurring

expansion

occurs when there is positive growth in real GDP, shown by the upward curve

during periods of real GDP growth

employment of resources increases and general price of resources begins to rise rapidly, known as inflation

peak

cycle's maximum real GDP growth and marks the end of expansion

when economy reaches a peak

unemployment of resources has fallen and the general price of the economy may be rising rapidly, therefore the economy may eb experiencing inflation

contraction

after peak, economy begins to experience negative real GDP growth, shown through downward curve

contraction what happens

increases in price levels may slow down and it is possible that prices in some sectors may begin to fall

recession

contraction last 6 months, characterised by falling real GDP and growing underemployment of resources

trough

cycle's minimum real GDP growth and marks end of contraction

trough what happens

there may be widespread unemployment

recovery

trough is followed by expansion, marking end of cycle