Article Link: http://www.economist.com/blogs/freeexchange/2013/01/business-cycles
Article Title: Running Out Of Time
This article discusses the history of
America’s struggle in terms of their economy and their current situations. A
current situation involves the Federal governments projecting an unemployment
rate between 6-6.6% in 2015. During 2011-2012, the level of job growth was slim
and the economy will only regain its pre-recession level of employment. “A new
recession may become a risk at a time when the economy has yet to work off the
unemployment problem from the last downturn, and in a world in which the Fed is
unwilling to respond an aggressively as the case demands because of its
concerns regarding the risks of unconventional policy.” This quotation from the
article states that a new recession may occur because of the issues the government
decides not to fix. The economy has went through a similar downturn and because
of this, the government is still unable to fix their new problem, being
unemployment.
Primarily, the
four stages of the business cycle include:
Contraction/recession, Trough, Expansion, and Peak. Each stage is
different, at some point a business will definitely be at one of these
stages. Generally, contraction or also called recession is when the
economy starts to slow down. Trough is when the economy is at the bottom
of the business cycle. However, expansion is more of the "recovery"
stage or in other words, the economy starts to grow again. And lastly,
peak is usually the top of the cycle also when the economy is in the
state of "irrational exuberance" claimed by Amadeo in the given article.
According to Amadeo, "irrational exuberance is when the investors are
so confident that the price of an asset will increase they lose sight of
its underlying value." On another note, the NBER which stands for The
National Bureau of Economic Research evaluates economic indicators which
helps one envision future trends, the determine the phases of the
business cycle. Therefore, this article conveys many reasons and
information about the business cycle on what to expect, as well as the
causes, and so on.
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