Book contents
- Frontmatter
- Brief Contents
- Contents
- Acknowledgments
- To the Student
- To the Teacher
- Part I Introduction
- Part II The National Accounts
- Part III Trends and Cycles
- 5 Trends and Cycles
- Part IV Financial Markets
- Part V Aggregate Supply
- Part VI Aggregate Demand
- Part VII Macroeconomic Dynamics
- Part VIII Macroeconomic Policy
- Part IX Macroeconomic Data
- Symbols
- Glossary
- Guide to Online Resources
- Index
- References
5 - Trends and Cycles
from Part III - Trends and Cycles
Published online by Cambridge University Press: 05 June 2012
- Frontmatter
- Brief Contents
- Contents
- Acknowledgments
- To the Student
- To the Teacher
- Part I Introduction
- Part II The National Accounts
- Part III Trends and Cycles
- 5 Trends and Cycles
- Part IV Financial Markets
- Part V Aggregate Supply
- Part VI Aggregate Demand
- Part VII Macroeconomic Dynamics
- Part VIII Macroeconomic Policy
- Part IX Macroeconomic Data
- Symbols
- Glossary
- Guide to Online Resources
- Index
- References
Summary
The last three chapters focused on the measurement of key national accounting variables: GDP and prices. Although these are the centerpiece of macroeconomic analysis, there are thousands of other measures of the economy – most related in one way or another to GDP and its components. In this chapter, we begin a wider examination of the economy, shifting our focus to the question, how do GDP and a large variety of other economic variables behave over time? We begin by dividing their movements into longer run trends and shorter run cycles. We then ask, are the cycles in different variables closely related to an economy-wide business cycle? And, finally, what are the properties of the business cycle?
Decomposing Time Series
Look back at Figure 2.10 or 2.12. Each shows the path of U.S. real GDP over a period of about sixty years. Two characteristics of these graphs stand out. First, the dominant movement of U.S. GDP is upward. But, second, the movement is unsteady: there are frequent and, at best, roughly regular ups and downs. A large proportion of the thousands of economic time series that describe the economy behave similarly. Take three examples: Figure 5.1 shows the time series for personal disposable income (less transfers), industrial production, and employment. Each one resembles GDP; each displays a pattern of fluctuations around a dominant upward path.
The economist often finds it useful to distinguish the dominant path, known as the trend , from the fluctuations, known as the cycle , because distinct factors explain each. Most of the later chapters of this book aim to explain the trend (especially Chapters 9 and 10) or the cycle (especially Chapters 13–15).
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- Chapter
- Information
- Applied Intermediate Macroeconomics , pp. 139 - 164Publisher: Cambridge University PressPrint publication year: 2011