Economic growth and business
cycle
9-1. Definition of Economic growth: It is the increase in value of the
goods and services produced by an economy.
It is usually measured as the percent rate of increase in real gross domestic product, or GDP.
9-2. Business cycle: The main theory in economic
growth is business cycle which means the changes in
economic growth.
One business cycle is defined as a period of
economic decline or a contraction followed by a longer expansionary period.
The business cycle or
economic cycle refers to the fluctuations of economic activity about its long
term growth trend.
9-3. Traditional business cycle models
The main types of business cycles
enumerated by Joseph Schumpeter and others in this field
have been named after their discoverers:
· the Kitchin inventory cycle (3-5
years) - after Joseph Kitchin.
· the Juglar fixed
investment cycle (7-11 years) -- after Clement Juglar.
· the Kuznets infrastructural investment
cycle (15-25 years) -- after Simon Kuznets,
Nobel Laureate.
· the Kondratieff
wave or cycle (45-60 years) -- after Nikolai Kondratieff.
9-4. Periods of the businesscycle: The
two periods of the businesscycle
are expansion and contraction.
9-4.1.Contraction: A phase of the
business cycle in which the economy as a whole is in decline.
9-4.1.1. Recession: A significant decline
in economic activities, lasting longer than a few months. It is visible in
industrial production, employment, real income and trade.
9-4.1.2. Depression:
A severe and prolonged recession characterized by inefficient economic productivity,
high unemployment and falling price levels.