Tradeeconomics: Peak, Recession, Trough And Expansion

Submitted By PeterSmyth
Words: 340
Pages: 2

The current stage of the economy's business cycle is Expansion. According to the book, there are four stages in the business cycle: Peak, Recession, Trough and Expansion. The peak is when business activity has reached a maximum, the recession is when the economy is slowing down, the trough is when it hits bottom, and expansion is when the economy starts growing again (p. 521).

As the economy slows down in a recession, the GDP (Gross Domestic Product) growth rates usually slow to 1-2% before turning negative. In 2008, the economy shrank 1.8% in the first quarter, grew 1.3% in the second quarter, fell again in the third quarter to 3.9% and then plummeted in the fourth quarter 8.9%, which would be the trough. This continued into 2009, when the economy dropped another 6.9% in the first quarter. The turning point, according to the NBER, was in the second quarter of 2009, when GDP contracted only .7%, and then turned positive growing 1.6% in the third quarter of 2009. The GDP growth rate continued to be positive through the rest of 2010 and 2011, and was 3% in the fourth quarter of 2011 (http://www.tradingeconomics.com/united-states/gdp-growth and http://useconomy.about.com/od/economicindicators/a/GDP-statistics.htm).

Unemployment, however, is considered a "lagging indicator," and still hasn't caught up with the expanding economy. It currently sits at 8.2% according to http://www.bls.gov/cps/. As a "lagging indicator" of the economy, it measures the effect of economic…