{"id":212,"date":"2018-04-05T01:06:49","date_gmt":"2018-04-05T01:06:49","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/os-macroecon-e2\/chapter\/tracking-real-gdp-over-time\/"},"modified":"2018-05-03T16:10:24","modified_gmt":"2018-05-03T16:10:24","slug":"tracking-real-gdp-over-time","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/suny-fmcc-macroeconomics\/chapter\/tracking-real-gdp-over-time\/","title":{"raw":"Tracking Real GDP over Time","rendered":"Tracking Real GDP over Time"},"content":{"raw":"<div class=\"textbox learning-objectives\">\r\n<h3>Learning Objectives<\/h3>\r\nBy the end of this section, you will be able to:\r\n<ul>\r\n \t<li>Explain recessions, depressions, peaks, and troughs<\/li>\r\n \t<li>Evaluate the importance of tracking real GDP over time<\/li>\r\n<\/ul>\r\n<\/div>\r\n<p id=\"fs-idp94661760\">When news reports indicate that \"the economy grew 1.2% in the first quarter,\" the reports are referring to the percentage change in real GDP. By convention, governments report GDP growth is at an annualized rate: Whatever the calculated growth in real GDP was for the quarter, we multiply it by four when it is reported as if the economy were growing at that rate for a full year.<\/p>\r\n\r\n<figure id=\"CNX_Econ_C19_008\">\r\n\r\n[caption id=\"\" align=\"aligncenter\" width=\"235\"]<img src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/3165\/2018\/04\/05010648\/CNX_Econ_C19_008.jpg\" alt=\"The graph illustrates that both real GDP and real GDP per capita have substantially increased since 1900.\" width=\"235\" height=\"155\" \/> U.S. GDP, 1900\u20132016.\u00a0Real GDP in the United States in 2016 (in 2009 dollars) was about $16.7 trillion. After adjusting to remove the effects of inflation, this represents a roughly 20-fold increase in the economy\u2019s production of goods and services since the start of the twentieth century. (Source: bea.gov)[\/caption]<\/figure>\r\n<p id=\"fs-idp4304016\"><a class=\"autogenerated-content\" href=\"#CNX_Econ_C19_008\">[link]<\/a> shows the pattern of U.S. real GDP since 1900. Short term declines have regularly interrupted the generally upward long-term path of GDP. We call a significant decline in real GDP a <strong>recession<\/strong>. We call an especially lengthy and deep recession a<strong> depression<\/strong>. The severe drop in GDP that occurred during the 1930s <strong><span class=\"no-emphasis\">Great Depression<\/span><\/strong> is clearly visible in the figure, as is the 2008\u20132009 <strong><span class=\"no-emphasis\">Great Recession<\/span>.<\/strong><\/p>\r\n<p id=\"fs-idp75162576\">Real GDP is important because it is highly correlated with other measures of economic activity, like employment and unemployment. When real GDP rises, so does employment.<\/p>\r\n<p id=\"fs-idp2371200\">The most significant human problem associated with recessions (and their larger, uglier cousins, depressions) is that a slowdown in production means that firms need to lay off or fire some of their workers. Losing a job imposes painful financial and personal costs on workers, and often on their extended families as well. In addition, even those who keep their jobs are likely to find that wage raises are scanty at best\u2014or their employers may ask them to take pay cuts.<\/p>\r\n<p id=\"fs-idm76443104\"><a class=\"autogenerated-content\" href=\"#Table_19_09\">[link]<\/a> lists the pattern of recessions and expansions in the U.S. economy since 1900. We call the highest point of the economy, before the recession begins, the<strong> peak<\/strong>. Conversely, the lowest point of a recession, before a recovery begins, is the trough. Thus, a recession lasts from peak to <strong>trough<\/strong>, and an economic upswing runs from trough to peak. We call the economy's movement from peak to trough and trough to peak the <strong>business cycle<\/strong>. It is intriguing to notice that the three longest trough-to-peak expansions of the twentieth century have happened since 1960. The most recent recession started in December 2007 and ended formally in June 2009. This was the most severe recession since the 1930s Great Depression. The ongoing expansion since the June 2009 trough will also be quite long, comparatively, having already reached 90 months at the end of 2016.<\/p>\r\n\r\n<table id=\"Table_19_09\" summary=\"The table shows the pattern of recessions and expansions in the U.S. economy since 1900. Column 1 lists the Trough dates. Column 2 lists the Peak dates. Column 3 lists the Months of Contraction. Column 4 lists the Months of Expansion. Trough: December 1900; Peak: September 1902; 18 (months of contraction); 21 (months of expansion). Trough: August 1904; Peak: May 1907; 23 (months of contraction); 33 (months of expansion). Trough: June 1908; Peak: January 1910; 13 (months of contraction); 19 (months of expansion). Trough: January 1912; Peak: January 1913; 24 (months of contraction); 12 (months of expansion). Trough: December 1914; Peak: August 1918; 23 (months of contraction); 44 (months of expansion). Trough: March 1919; Peak: January 1920; 7 (months of contraction); 10 (months of expansion). Trough: July 1921; Peak: May 1923; 18 (months of contraction); 22 (months of expansion). Trough: July 1924; Peak: October 1926; 14 (months of contraction); 27 (months of expansion). Trough: November 1927; Peak: August 1929; 23 (months of contraction); 21 (months of expansion). Trough: March 1933; Peak: May 1937; 43 (months of contraction); 50 (months of expansion). Trough: June 1938; Peak: February 1945; 13 (months of contraction); 80 (months of expansion). Trough: October 1945; Peak: November 1948; 8 (months of contraction); 37 (months of expansion). Trough: October 1949; Peak: July 1953; 11 (months of contraction); 45 (months of expansion). Trough: May 1954; Peak: August 1957; 10 (months of contraction); 39 (months of expansion). Trough: April 1958; Peak: April 1960; 8 (months of contraction); 24 (months of expansion). Trough: February 1961; Peak: December 1969; 10 (months of contraction); 106 (months of expansion). Trough: November 1970; Peak: November 1973; 11 (months of contraction); 36 (months of expansion). Trough: March 1975; Peak: January 1980; 16 (months of contraction); 58 (months of expansion). Trough: July 1980; Peak: July 1981; 6 (months of contraction); 12 (months of expansion). Trough: November 1982; Peak: July 1990; 16 (months of contraction); 92 (months of expansion). Trough: March 2001; Peak: November 2001; 8 (months of contraction); 120 (months of expansion). Trough: December 2007; Peak: June 2009; 18 (months of contraction); 73 (months of expansion).\"><caption>U.S. Business Cycles since 1900(Source: http:\/\/www.nber.org\/cycles\/main.html)<\/caption>\r\n<thead>\r\n<tr>\r\n<th style=\"text-align: center\">Trough<\/th>\r\n<th style=\"text-align: center\">Peak<\/th>\r\n<th style=\"text-align: center\">Months of Contraction<\/th>\r\n<th style=\"text-align: center\">Months of Expansion<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<td style=\"text-align: center\">December 1900<\/td>\r\n<td style=\"text-align: center\">September 1902<\/td>\r\n<td style=\"text-align: center\">18<\/td>\r\n<td style=\"text-align: center\">21<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center\">August 1904<\/td>\r\n<td style=\"text-align: center\">May 1907<\/td>\r\n<td style=\"text-align: center\">23<\/td>\r\n<td style=\"text-align: center\">33<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center\">June 1908<\/td>\r\n<td style=\"text-align: center\">January 1910<\/td>\r\n<td style=\"text-align: center\">13<\/td>\r\n<td style=\"text-align: center\">19<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center\">January 1912<\/td>\r\n<td style=\"text-align: center\">January 1913<\/td>\r\n<td style=\"text-align: center\">24<\/td>\r\n<td style=\"text-align: center\">12<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center\">December 1914<\/td>\r\n<td style=\"text-align: center\">August 1918<\/td>\r\n<td style=\"text-align: center\">23<\/td>\r\n<td style=\"text-align: center\">44<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center\">March 1919<\/td>\r\n<td style=\"text-align: center\">January 1920<\/td>\r\n<td style=\"text-align: center\">7<\/td>\r\n<td style=\"text-align: center\">10<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center\">July 1921<\/td>\r\n<td style=\"text-align: center\">May 1923<\/td>\r\n<td style=\"text-align: center\">18<\/td>\r\n<td style=\"text-align: center\">22<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center\">July 1924<\/td>\r\n<td style=\"text-align: center\">October 1926<\/td>\r\n<td style=\"text-align: center\">14<\/td>\r\n<td style=\"text-align: center\">27<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center\">November 1927<\/td>\r\n<td style=\"text-align: center\">August 1929<\/td>\r\n<td style=\"text-align: center\">23<\/td>\r\n<td style=\"text-align: center\">21<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center\">March 1933<\/td>\r\n<td style=\"text-align: center\">May 1937<\/td>\r\n<td style=\"text-align: center\">43<\/td>\r\n<td style=\"text-align: center\">50<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center\">June 1938<\/td>\r\n<td style=\"text-align: center\">February 1945<\/td>\r\n<td style=\"text-align: center\">13<\/td>\r\n<td style=\"text-align: center\">80<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center\">October 1945<\/td>\r\n<td style=\"text-align: center\">November 1948<\/td>\r\n<td style=\"text-align: center\">8<\/td>\r\n<td style=\"text-align: center\">37<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center\">October 1949<\/td>\r\n<td style=\"text-align: center\">July 1953<\/td>\r\n<td style=\"text-align: center\">11<\/td>\r\n<td style=\"text-align: center\">45<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center\">May 1954<\/td>\r\n<td style=\"text-align: center\">August 1957<\/td>\r\n<td style=\"text-align: center\">10<\/td>\r\n<td style=\"text-align: center\">39<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center\">April 1958<\/td>\r\n<td style=\"text-align: center\">April 1960<\/td>\r\n<td style=\"text-align: center\">8<\/td>\r\n<td style=\"text-align: center\">24<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center\">February 1961<\/td>\r\n<td style=\"text-align: center\">December 1969<\/td>\r\n<td style=\"text-align: center\">10<\/td>\r\n<td style=\"text-align: center\">106<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center\">November 1970<\/td>\r\n<td style=\"text-align: center\">November 1973<\/td>\r\n<td style=\"text-align: center\">11<\/td>\r\n<td style=\"text-align: center\">36<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center\">March 1975<\/td>\r\n<td style=\"text-align: center\">January 1980<\/td>\r\n<td style=\"text-align: center\">16<\/td>\r\n<td style=\"text-align: center\">58<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center\">July 1980<\/td>\r\n<td style=\"text-align: center\">July 1981<\/td>\r\n<td style=\"text-align: center\">6<\/td>\r\n<td style=\"text-align: center\">12<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center\">November 1982<\/td>\r\n<td style=\"text-align: center\">July 1990<\/td>\r\n<td style=\"text-align: center\">16<\/td>\r\n<td style=\"text-align: center\">92<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center\">March 1991<\/td>\r\n<td style=\"text-align: center\">March 2001<\/td>\r\n<td style=\"text-align: center\">8<\/td>\r\n<td style=\"text-align: center\">120<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"text-align: center\">November 2001<\/td>\r\n<td style=\"text-align: center\">December 2007<\/td>\r\n<td style=\"text-align: center\">8<\/td>\r\n<td style=\"text-align: center\">73<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<p id=\"fs-idp29009152\">A private think tank, the <span class=\"no-emphasis\"><strong>National Bureau of Economic Research (NBER)<\/strong><\/span>, tracks business cycles for the U.S. economy. However, the effects of a severe recession often linger after the official ending date assigned by the NBER.<\/p>\r\n\r\n<section id=\"fs-idp17544032\" class=\"summary\">\r\n<div class=\"textbox key-takeaways\">\r\n<h3>Key Concepts and Summary<\/h3>\r\n<p id=\"fs-idm24831088\">Over the long term, U.S. real GDP have increased dramatically. At the same time, GDP has not increased the same amount each year. The speeding up and slowing down of GDP growth represents the business cycle. When GDP declines significantly, a recession occurs. A longer and deeper decline is a depression. Recessions begin at the business cycle's peak and end at the trough.<\/p>\r\n\r\n<\/div>\r\n<\/section><section id=\"fs-idp158656\" class=\"self-check-questions\">\r\n<div class=\"textbox exercises\">\r\n<h3>Self-Check Questions<\/h3>\r\n<div id=\"fs-idm35530192\">\r\n<div id=\"fs-idp4421712\">\r\n<p id=\"fs-idm16923200\">Without looking at <a class=\"autogenerated-content\" href=\"#Table_19_09\">[link]<\/a>, return to <a class=\"autogenerated-content\" href=\"#CNX_Econ_C19_008\">[link]<\/a>. If we define a recession as a significant decline in national output, can you identify any post-1960 recessions in addition to the 2008-2009 recession? (This requires a judgment call.)<\/p>\r\n\r\n<\/div>\r\n<div id=\"fs-idm18437456\">\r\n<p id=\"fs-idp157584\">[reveal-answer q=\"243710\"]Show Answer[\/reveal-answer]\r\n[hidden-answer a=\"243710\"]Two other major recessions are visible in the figure as slight dips: those of 1973\u20131975, and 1981\u20131982. Two other recessions appear in the figure as a flattening of the path of real GDP. These were in 1990\u20131991 and 2001.[\/hidden-answer]<\/p>\r\n\r\n<\/div>\r\n<\/div>\r\n<div id=\"fs-idp22823008\">\r\n<div id=\"fs-idp70438560\">\r\n<p id=\"fs-idp23154320\">According to <a class=\"autogenerated-content\" href=\"#Table_19_09\">[link]<\/a>, how often have recessions occurred since the end of World War II (1945)?<\/p>\r\n\r\n<\/div>\r\n<div id=\"fs-idm24827872\">\r\n<p id=\"fs-idp523936\">[reveal-answer q=\"28688\"]Show Answer[\/reveal-answer]\r\n[hidden-answer a=\"28688\"]11 recessions in approximately 70 years averages about one recession every six years.[\/hidden-answer]<\/p>\r\n\r\n<\/div>\r\n<\/div>\r\n<div id=\"fs-idp1340512\">\r\n<div id=\"fs-idp55292128\">\r\n<p id=\"fs-idp33642496\">According to <a class=\"autogenerated-content\" href=\"#Table_19_09\">[link]<\/a>, how long has the average recession lasted since the end of World War II?<\/p>\r\n\r\n<\/div>\r\n<div id=\"fs-idp32865968\">\r\n<p id=\"fs-idp7320672\">[reveal-answer q=\"702472\"]Show Answer[\/reveal-answer]\r\n[hidden-answer a=\"702472\"]The table lists the \"Months of Contraction\" for each recession. Averaging these figures for the post-WWII recessions gives an average duration of 11 months, or slightly less than a year.[\/hidden-answer]<\/p>\r\n\r\n<\/div>\r\n<\/div>\r\n<div id=\"fs-idm10104304\">\r\n<div id=\"fs-idm5028432\">\r\n<p id=\"fs-idp91448576\">According to <a class=\"autogenerated-content\" href=\"#Table_19_09\">[link]<\/a>, how long has the average expansion lasted since the end of World War II?<\/p>\r\n\r\n<\/div>\r\n<div id=\"fs-idp44484688\">\r\n<p id=\"fs-idp16084880\">[reveal-answer q=\"393375\"]Show Answer[\/reveal-answer]\r\n[hidden-answer a=\"393375\"]The table lists the \"Months of Expansion.\" Averaging these figures for the post-WWII expansions gives an average expansion of 60.5 months, or more than five years.[\/hidden-answer]<\/p>\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n<\/section><section id=\"fs-idp54008768\" class=\"review-questions\">\r\n<div class=\"textbox exercises\"><section id=\"fs-idp54008768\" class=\"review-questions\">\r\n<h3>Review Question<\/h3>\r\n<div id=\"fs-idp5267840\">\r\n<div id=\"fs-idp6610432\">\r\n<p id=\"fs-idp73027344\">What are typical GDP patterns for a high-income economy like the United States in the long run and the short run?<\/p>\r\n&nbsp;\r\n\r\n<\/div>\r\n<\/div>\r\n<\/section><section id=\"fs-idp1212272\" class=\"critical-thinking\">\r\n<h3>Critical Thinking Questions<\/h3>\r\n<div id=\"fs-idp35437712\">\r\n<div id=\"fs-idp12210144\">\r\n<p id=\"fs-idp5245536\">Why do you suppose that U.S. GDP is so much higher today than 50 or 100 years ago?<\/p>\r\n\r\n<\/div>\r\n<\/div>\r\n<div id=\"fs-idm75881664\">\r\n<div id=\"fs-idm63654624\">\r\n<p id=\"fs-idp967696\">Why do you think that GDP does not grow at a steady rate, but rather speeds up and slows down?<\/p>\r\n\r\n<\/div>\r\n<\/div>\r\n<\/section><\/div>\r\n<\/section><section id=\"fs-idm81210160\" class=\"references\">\r\n<h3>References<\/h3>\r\n<p id=\"fs-idm26865680\">The National Bureau of Economic Research. \"Information on Recessions and Recoveries, the NBER Business Cycle Dating Committee, and related topics.\" http:\/\/www.nber.org\/cycles\/main.html.<\/p>\r\n\r\n<\/section>\r\n<div>\r\n<div class=\"textbox shaded\">\r\n<h3>Glossary<\/h3>\r\n<dl id=\"fs-idp4290944\">\r\n \t<dt>business cycle<\/dt>\r\n \t<dd id=\"fs-idp3873088\">the economy's relatively short-term movement in and out of recession<\/dd>\r\n<\/dl>\r\n<dl id=\"fs-idp27754240\">\r\n \t<dt>depression<\/dt>\r\n \t<dd id=\"fs-idp10759360\">an especially lengthy and deep decline in output<\/dd>\r\n<\/dl>\r\n<dl id=\"fs-idp26586384\">\r\n \t<dt>peak<\/dt>\r\n \t<dd id=\"fs-idm87433472\">during the business cycle, the highest point of output before a recession begins<\/dd>\r\n<\/dl>\r\n<dl id=\"fs-idp3736448\">\r\n \t<dt>recession<\/dt>\r\n \t<dd id=\"fs-idm14196896\">a significant decline in national output<\/dd>\r\n<\/dl>\r\n<dl id=\"fs-idp1056848\">\r\n \t<dt>trough<\/dt>\r\n \t<dd id=\"fs-idm42687872\">during the business cycle, the lowest point of output in a recession, before a recovery begins<\/dd>\r\n<\/dl>\r\n<\/div>\r\n<\/div>","rendered":"<div class=\"textbox learning-objectives\">\n<h3>Learning Objectives<\/h3>\n<p>By the end of this section, you will be able to:<\/p>\n<ul>\n<li>Explain recessions, depressions, peaks, and troughs<\/li>\n<li>Evaluate the importance of tracking real GDP over time<\/li>\n<\/ul>\n<\/div>\n<p id=\"fs-idp94661760\">When news reports indicate that &#8220;the economy grew 1.2% in the first quarter,&#8221; the reports are referring to the percentage change in real GDP. By convention, governments report GDP growth is at an annualized rate: Whatever the calculated growth in real GDP was for the quarter, we multiply it by four when it is reported as if the economy were growing at that rate for a full year.<\/p>\n<figure id=\"CNX_Econ_C19_008\">\n<div style=\"width: 245px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/3165\/2018\/04\/05010648\/CNX_Econ_C19_008.jpg\" alt=\"The graph illustrates that both real GDP and real GDP per capita have substantially increased since 1900.\" width=\"235\" height=\"155\" \/><\/p>\n<p class=\"wp-caption-text\">U.S. GDP, 1900\u20132016.\u00a0Real GDP in the United States in 2016 (in 2009 dollars) was about $16.7 trillion. After adjusting to remove the effects of inflation, this represents a roughly 20-fold increase in the economy\u2019s production of goods and services since the start of the twentieth century. (Source: bea.gov)<\/p>\n<\/div>\n<\/figure>\n<p id=\"fs-idp4304016\"><a class=\"autogenerated-content\" href=\"#CNX_Econ_C19_008\">[link]<\/a> shows the pattern of U.S. real GDP since 1900. Short term declines have regularly interrupted the generally upward long-term path of GDP. We call a significant decline in real GDP a <strong>recession<\/strong>. We call an especially lengthy and deep recession a<strong> depression<\/strong>. The severe drop in GDP that occurred during the 1930s <strong><span class=\"no-emphasis\">Great Depression<\/span><\/strong> is clearly visible in the figure, as is the 2008\u20132009 <strong><span class=\"no-emphasis\">Great Recession<\/span>.<\/strong><\/p>\n<p id=\"fs-idp75162576\">Real GDP is important because it is highly correlated with other measures of economic activity, like employment and unemployment. When real GDP rises, so does employment.<\/p>\n<p id=\"fs-idp2371200\">The most significant human problem associated with recessions (and their larger, uglier cousins, depressions) is that a slowdown in production means that firms need to lay off or fire some of their workers. Losing a job imposes painful financial and personal costs on workers, and often on their extended families as well. In addition, even those who keep their jobs are likely to find that wage raises are scanty at best\u2014or their employers may ask them to take pay cuts.<\/p>\n<p id=\"fs-idm76443104\"><a class=\"autogenerated-content\" href=\"#Table_19_09\">[link]<\/a> lists the pattern of recessions and expansions in the U.S. economy since 1900. We call the highest point of the economy, before the recession begins, the<strong> peak<\/strong>. Conversely, the lowest point of a recession, before a recovery begins, is the trough. Thus, a recession lasts from peak to <strong>trough<\/strong>, and an economic upswing runs from trough to peak. We call the economy&#8217;s movement from peak to trough and trough to peak the <strong>business cycle<\/strong>. It is intriguing to notice that the three longest trough-to-peak expansions of the twentieth century have happened since 1960. The most recent recession started in December 2007 and ended formally in June 2009. This was the most severe recession since the 1930s Great Depression. The ongoing expansion since the June 2009 trough will also be quite long, comparatively, having already reached 90 months at the end of 2016.<\/p>\n<table id=\"Table_19_09\" summary=\"The table shows the pattern of recessions and expansions in the U.S. economy since 1900. Column 1 lists the Trough dates. Column 2 lists the Peak dates. Column 3 lists the Months of Contraction. Column 4 lists the Months of Expansion. Trough: December 1900; Peak: September 1902; 18 (months of contraction); 21 (months of expansion). Trough: August 1904; Peak: May 1907; 23 (months of contraction); 33 (months of expansion). Trough: June 1908; Peak: January 1910; 13 (months of contraction); 19 (months of expansion). Trough: January 1912; Peak: January 1913; 24 (months of contraction); 12 (months of expansion). Trough: December 1914; Peak: August 1918; 23 (months of contraction); 44 (months of expansion). Trough: March 1919; Peak: January 1920; 7 (months of contraction); 10 (months of expansion). Trough: July 1921; Peak: May 1923; 18 (months of contraction); 22 (months of expansion). Trough: July 1924; Peak: October 1926; 14 (months of contraction); 27 (months of expansion). Trough: November 1927; Peak: August 1929; 23 (months of contraction); 21 (months of expansion). Trough: March 1933; Peak: May 1937; 43 (months of contraction); 50 (months of expansion). Trough: June 1938; Peak: February 1945; 13 (months of contraction); 80 (months of expansion). Trough: October 1945; Peak: November 1948; 8 (months of contraction); 37 (months of expansion). Trough: October 1949; Peak: July 1953; 11 (months of contraction); 45 (months of expansion). Trough: May 1954; Peak: August 1957; 10 (months of contraction); 39 (months of expansion). Trough: April 1958; Peak: April 1960; 8 (months of contraction); 24 (months of expansion). Trough: February 1961; Peak: December 1969; 10 (months of contraction); 106 (months of expansion). Trough: November 1970; Peak: November 1973; 11 (months of contraction); 36 (months of expansion). Trough: March 1975; Peak: January 1980; 16 (months of contraction); 58 (months of expansion). Trough: July 1980; Peak: July 1981; 6 (months of contraction); 12 (months of expansion). Trough: November 1982; Peak: July 1990; 16 (months of contraction); 92 (months of expansion). Trough: March 2001; Peak: November 2001; 8 (months of contraction); 120 (months of expansion). Trough: December 2007; Peak: June 2009; 18 (months of contraction); 73 (months of expansion).\">\n<caption>U.S. Business Cycles since 1900(Source: http:\/\/www.nber.org\/cycles\/main.html)<\/caption>\n<thead>\n<tr>\n<th style=\"text-align: center\">Trough<\/th>\n<th style=\"text-align: center\">Peak<\/th>\n<th style=\"text-align: center\">Months of Contraction<\/th>\n<th style=\"text-align: center\">Months of Expansion<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td style=\"text-align: center\">December 1900<\/td>\n<td style=\"text-align: center\">September 1902<\/td>\n<td style=\"text-align: center\">18<\/td>\n<td style=\"text-align: center\">21<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center\">August 1904<\/td>\n<td style=\"text-align: center\">May 1907<\/td>\n<td style=\"text-align: center\">23<\/td>\n<td style=\"text-align: center\">33<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center\">June 1908<\/td>\n<td style=\"text-align: center\">January 1910<\/td>\n<td style=\"text-align: center\">13<\/td>\n<td style=\"text-align: center\">19<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center\">January 1912<\/td>\n<td style=\"text-align: center\">January 1913<\/td>\n<td style=\"text-align: center\">24<\/td>\n<td style=\"text-align: center\">12<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center\">December 1914<\/td>\n<td style=\"text-align: center\">August 1918<\/td>\n<td style=\"text-align: center\">23<\/td>\n<td style=\"text-align: center\">44<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center\">March 1919<\/td>\n<td style=\"text-align: center\">January 1920<\/td>\n<td style=\"text-align: center\">7<\/td>\n<td style=\"text-align: center\">10<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center\">July 1921<\/td>\n<td style=\"text-align: center\">May 1923<\/td>\n<td style=\"text-align: center\">18<\/td>\n<td style=\"text-align: center\">22<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center\">July 1924<\/td>\n<td style=\"text-align: center\">October 1926<\/td>\n<td style=\"text-align: center\">14<\/td>\n<td style=\"text-align: center\">27<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center\">November 1927<\/td>\n<td style=\"text-align: center\">August 1929<\/td>\n<td style=\"text-align: center\">23<\/td>\n<td style=\"text-align: center\">21<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center\">March 1933<\/td>\n<td style=\"text-align: center\">May 1937<\/td>\n<td style=\"text-align: center\">43<\/td>\n<td style=\"text-align: center\">50<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center\">June 1938<\/td>\n<td style=\"text-align: center\">February 1945<\/td>\n<td style=\"text-align: center\">13<\/td>\n<td style=\"text-align: center\">80<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center\">October 1945<\/td>\n<td style=\"text-align: center\">November 1948<\/td>\n<td style=\"text-align: center\">8<\/td>\n<td style=\"text-align: center\">37<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center\">October 1949<\/td>\n<td style=\"text-align: center\">July 1953<\/td>\n<td style=\"text-align: center\">11<\/td>\n<td style=\"text-align: center\">45<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center\">May 1954<\/td>\n<td style=\"text-align: center\">August 1957<\/td>\n<td style=\"text-align: center\">10<\/td>\n<td style=\"text-align: center\">39<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center\">April 1958<\/td>\n<td style=\"text-align: center\">April 1960<\/td>\n<td style=\"text-align: center\">8<\/td>\n<td style=\"text-align: center\">24<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center\">February 1961<\/td>\n<td style=\"text-align: center\">December 1969<\/td>\n<td style=\"text-align: center\">10<\/td>\n<td style=\"text-align: center\">106<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center\">November 1970<\/td>\n<td style=\"text-align: center\">November 1973<\/td>\n<td style=\"text-align: center\">11<\/td>\n<td style=\"text-align: center\">36<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center\">March 1975<\/td>\n<td style=\"text-align: center\">January 1980<\/td>\n<td style=\"text-align: center\">16<\/td>\n<td style=\"text-align: center\">58<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center\">July 1980<\/td>\n<td style=\"text-align: center\">July 1981<\/td>\n<td style=\"text-align: center\">6<\/td>\n<td style=\"text-align: center\">12<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center\">November 1982<\/td>\n<td style=\"text-align: center\">July 1990<\/td>\n<td style=\"text-align: center\">16<\/td>\n<td style=\"text-align: center\">92<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center\">March 1991<\/td>\n<td style=\"text-align: center\">March 2001<\/td>\n<td style=\"text-align: center\">8<\/td>\n<td style=\"text-align: center\">120<\/td>\n<\/tr>\n<tr>\n<td style=\"text-align: center\">November 2001<\/td>\n<td style=\"text-align: center\">December 2007<\/td>\n<td style=\"text-align: center\">8<\/td>\n<td style=\"text-align: center\">73<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p id=\"fs-idp29009152\">A private think tank, the <span class=\"no-emphasis\"><strong>National Bureau of Economic Research (NBER)<\/strong><\/span>, tracks business cycles for the U.S. economy. However, the effects of a severe recession often linger after the official ending date assigned by the NBER.<\/p>\n<section id=\"fs-idp17544032\" class=\"summary\">\n<div class=\"textbox key-takeaways\">\n<h3>Key Concepts and Summary<\/h3>\n<p id=\"fs-idm24831088\">Over the long term, U.S. real GDP have increased dramatically. At the same time, GDP has not increased the same amount each year. The speeding up and slowing down of GDP growth represents the business cycle. When GDP declines significantly, a recession occurs. A longer and deeper decline is a depression. Recessions begin at the business cycle&#8217;s peak and end at the trough.<\/p>\n<\/div>\n<\/section>\n<section id=\"fs-idp158656\" class=\"self-check-questions\">\n<div class=\"textbox exercises\">\n<h3>Self-Check Questions<\/h3>\n<div id=\"fs-idm35530192\">\n<div id=\"fs-idp4421712\">\n<p id=\"fs-idm16923200\">Without looking at <a class=\"autogenerated-content\" href=\"#Table_19_09\">[link]<\/a>, return to <a class=\"autogenerated-content\" href=\"#CNX_Econ_C19_008\">[link]<\/a>. If we define a recession as a significant decline in national output, can you identify any post-1960 recessions in addition to the 2008-2009 recession? (This requires a judgment call.)<\/p>\n<\/div>\n<div id=\"fs-idm18437456\">\n<p id=\"fs-idp157584\">\n<div class=\"qa-wrapper\" style=\"display: block\"><span class=\"show-answer collapsed\" style=\"cursor: pointer\" data-target=\"q243710\">Show Answer<\/span><\/p>\n<div id=\"q243710\" class=\"hidden-answer\" style=\"display: none\">Two other major recessions are visible in the figure as slight dips: those of 1973\u20131975, and 1981\u20131982. Two other recessions appear in the figure as a flattening of the path of real GDP. These were in 1990\u20131991 and 2001.<\/div>\n<\/div>\n<\/div>\n<\/div>\n<div id=\"fs-idp22823008\">\n<div id=\"fs-idp70438560\">\n<p id=\"fs-idp23154320\">According to <a class=\"autogenerated-content\" href=\"#Table_19_09\">[link]<\/a>, how often have recessions occurred since the end of World War II (1945)?<\/p>\n<\/div>\n<div id=\"fs-idm24827872\">\n<p id=\"fs-idp523936\">\n<div class=\"qa-wrapper\" style=\"display: block\"><span class=\"show-answer collapsed\" style=\"cursor: pointer\" data-target=\"q28688\">Show Answer<\/span><\/p>\n<div id=\"q28688\" class=\"hidden-answer\" style=\"display: none\">11 recessions in approximately 70 years averages about one recession every six years.<\/div>\n<\/div>\n<\/div>\n<\/div>\n<div id=\"fs-idp1340512\">\n<div id=\"fs-idp55292128\">\n<p id=\"fs-idp33642496\">According to <a class=\"autogenerated-content\" href=\"#Table_19_09\">[link]<\/a>, how long has the average recession lasted since the end of World War II?<\/p>\n<\/div>\n<div id=\"fs-idp32865968\">\n<p id=\"fs-idp7320672\">\n<div class=\"qa-wrapper\" style=\"display: block\"><span class=\"show-answer collapsed\" style=\"cursor: pointer\" data-target=\"q702472\">Show Answer<\/span><\/p>\n<div id=\"q702472\" class=\"hidden-answer\" style=\"display: none\">The table lists the &#8220;Months of Contraction&#8221; for each recession. Averaging these figures for the post-WWII recessions gives an average duration of 11 months, or slightly less than a year.<\/div>\n<\/div>\n<\/div>\n<\/div>\n<div id=\"fs-idm10104304\">\n<div id=\"fs-idm5028432\">\n<p id=\"fs-idp91448576\">According to <a class=\"autogenerated-content\" href=\"#Table_19_09\">[link]<\/a>, how long has the average expansion lasted since the end of World War II?<\/p>\n<\/div>\n<div id=\"fs-idp44484688\">\n<p id=\"fs-idp16084880\">\n<div class=\"qa-wrapper\" style=\"display: block\"><span class=\"show-answer collapsed\" style=\"cursor: pointer\" data-target=\"q393375\">Show Answer<\/span><\/p>\n<div id=\"q393375\" class=\"hidden-answer\" style=\"display: none\">The table lists the &#8220;Months of Expansion.&#8221; Averaging these figures for the post-WWII expansions gives an average expansion of 60.5 months, or more than five years.<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n<section id=\"fs-idp54008768\" class=\"review-questions\">\n<div class=\"textbox exercises\">\n<section id=\"fs-idp54008768\" class=\"review-questions\">\n<h3>Review Question<\/h3>\n<div id=\"fs-idp5267840\">\n<div id=\"fs-idp6610432\">\n<p id=\"fs-idp73027344\">What are typical GDP patterns for a high-income economy like the United States in the long run and the short run?<\/p>\n<p>&nbsp;<\/p>\n<\/div>\n<\/div>\n<\/section>\n<section id=\"fs-idp1212272\" class=\"critical-thinking\">\n<h3>Critical Thinking Questions<\/h3>\n<div id=\"fs-idp35437712\">\n<div id=\"fs-idp12210144\">\n<p id=\"fs-idp5245536\">Why do you suppose that U.S. GDP is so much higher today than 50 or 100 years ago?<\/p>\n<\/div>\n<\/div>\n<div id=\"fs-idm75881664\">\n<div id=\"fs-idm63654624\">\n<p id=\"fs-idp967696\">Why do you think that GDP does not grow at a steady rate, but rather speeds up and slows down?<\/p>\n<\/div>\n<\/div>\n<\/section>\n<\/div>\n<\/section>\n<section id=\"fs-idm81210160\" class=\"references\">\n<h3>References<\/h3>\n<p id=\"fs-idm26865680\">The National Bureau of Economic Research. &#8220;Information on Recessions and Recoveries, the NBER Business Cycle Dating Committee, and related topics.&#8221; http:\/\/www.nber.org\/cycles\/main.html.<\/p>\n<\/section>\n<div>\n<div class=\"textbox shaded\">\n<h3>Glossary<\/h3>\n<dl id=\"fs-idp4290944\">\n<dt>business cycle<\/dt>\n<dd id=\"fs-idp3873088\">the economy&#8217;s relatively short-term movement in and out of recession<\/dd>\n<\/dl>\n<dl id=\"fs-idp27754240\">\n<dt>depression<\/dt>\n<dd id=\"fs-idp10759360\">an especially lengthy and deep decline in output<\/dd>\n<\/dl>\n<dl id=\"fs-idp26586384\">\n<dt>peak<\/dt>\n<dd id=\"fs-idm87433472\">during the business cycle, the highest point of output before a recession begins<\/dd>\n<\/dl>\n<dl id=\"fs-idp3736448\">\n<dt>recession<\/dt>\n<dd id=\"fs-idm14196896\">a significant decline in national output<\/dd>\n<\/dl>\n<dl id=\"fs-idp1056848\">\n<dt>trough<\/dt>\n<dd id=\"fs-idm42687872\">during the business cycle, the lowest point of output in a recession, before a recovery begins<\/dd>\n<\/dl>\n<\/div>\n<\/div>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-212\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Shared previously<\/div><ul class=\"citation-list\"><li>Principles of Macroeconomics 2e. <strong>Provided by<\/strong>: OpenStax. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"http:\/\/cnx.org\/contents\/27f59064-990e-48f1-b604-5188b9086c29@5.5\">http:\/\/cnx.org\/contents\/27f59064-990e-48f1-b604-5188b9086c29@5.5<\/a>. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em>. <strong>License Terms<\/strong>: Download for free at http:\/\/cnx.org\/contents\/27f59064-990e-48f1-b604-5188b9086c29@5.5<\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section>","protected":false},"author":2,"menu_order":4,"template":"","meta":{"_candela_citation":"[{\"type\":\"cc\",\"description\":\"Principles of Macroeconomics 2e\",\"author\":\"\",\"organization\":\"OpenStax\",\"url\":\"http:\/\/cnx.org\/contents\/27f59064-990e-48f1-b604-5188b9086c29@5.5\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"Download for free at http:\/\/cnx.org\/contents\/27f59064-990e-48f1-b604-5188b9086c29@5.5\"}]","CANDELA_OUTCOMES_GUID":"","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-212","chapter","type-chapter","status-publish","hentry"],"part":176,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/suny-fmcc-macroeconomics\/wp-json\/pressbooks\/v2\/chapters\/212","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/suny-fmcc-macroeconomics\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/suny-fmcc-macroeconomics\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-fmcc-macroeconomics\/wp-json\/wp\/v2\/users\/2"}],"version-history":[{"count":5,"href":"https:\/\/courses.lumenlearning.com\/suny-fmcc-macroeconomics\/wp-json\/pressbooks\/v2\/chapters\/212\/revisions"}],"predecessor-version":[{"id":990,"href":"https:\/\/courses.lumenlearning.com\/suny-fmcc-macroeconomics\/wp-json\/pressbooks\/v2\/chapters\/212\/revisions\/990"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/suny-fmcc-macroeconomics\/wp-json\/pressbooks\/v2\/parts\/176"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/suny-fmcc-macroeconomics\/wp-json\/pressbooks\/v2\/chapters\/212\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/suny-fmcc-macroeconomics\/wp-json\/wp\/v2\/media?parent=212"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-fmcc-macroeconomics\/wp-json\/pressbooks\/v2\/chapter-type?post=212"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-fmcc-macroeconomics\/wp-json\/wp\/v2\/contributor?post=212"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-fmcc-macroeconomics\/wp-json\/wp\/v2\/license?post=212"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}