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EconomicsModule 2 of 8

Understanding Business Cycles

5

Concepts

0

Formulas

1

Decisions

3

Quiz Questions

Key Concepts

5 concepts covered in this module.

Business Cycle Phases

Expansion (trough to peak), Peak, Contraction/Recession (peak to trough), Trough. GDP growth fluctuates around trend.

Credit Cycles

Expansion: easy credit, rising asset prices. Contraction: tightening, deleveraging. Credit cycles amplify business cycles.

Leading Indicators

Signal future economic activity: stock prices, building permits, ISM new orders, yield curve slope, consumer expectations.

Coincident Indicators

Move with the economy: industrial production, employment, personal income, manufacturing sales.

Lagging Indicators

Follow the economy: unemployment rate, CPI, prime rate, average duration of unemployment, inventory/sales ratio.

Decision Frameworks

1 decision frameworks to guide your analysis.

How to identify the business cycle phase?

  • Leading indicators to forecast turning points
  • Coincident indicators to confirm current phase
  • Lagging indicators to confirm phase changes already occurred

Mind Map

Visual overview of how concepts connect in this module.

Business Cycles
Phases
Expansion
Peak
Contraction/Recession
Trough
Recovery
Leading Indicators
Stock market
Building permits
Yield curve
Consumer expectations
ISM new orders
Coincident
Industrial production
Employment
Personal income
Manufacturing sales
Lagging
Unemployment rate
CPI
Prime rate
Avg duration unemployment
Credit Cycles
Easy credit → expansion
Tight credit → contraction
Amplifies business cycle
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Flashcard

Business Cycle Phases

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Answer
Expansion (trough to peak), Peak, Contraction/Recession (peak to trough), Trough. GDP growth fluctuates around trend.
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