ECO209Y5 Lecture Notes - Lecture 11: Business Cycle, Procyclical And Countercyclical, Money Supply
Document Summary
Lecture #11 business cycles, business cycle models and current events. Business cycles fluctuations around trend of gdp. Difference between actual and trend represent business cycles such as recessions (when actual is below trend) They can arise from a number of shocks: Monetary shock central bank can instigate. Productivity shock (most common) can be technology shock, drought, oil prices, etc. Some models are more suitable for studying some shocks relative to others. Amplitude/frequency of a deviation are highly irregular, difficult to predict, but persistent. Consumption, investment, employment, and average labor productivity are highly procyclical (positive correlated with gdp) These shocks tend to be persistent but not permanent (i. e. z is high today, z1 will also be high tomorrow, but maybe not as high) Total affects: increased y, decreased r, increased n, increased c, increased i, decreased p, change in money = 0.
