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Macroeconomics , Sixth Edition
William Boyes, Arizona State University
Michael Melvin, Arizona State University
Internet Exercises
Business Cycles and AD/AS


In Chapter 9 we learned how changes in aggregate demand (AD) and aggregate supply (AS) are associated with business cycle fluctuations. An increase (decrease) in AD should be expansionary (contractionary) with rising (falling) GDP and prices. An increase (decrease) in AS should be expansionary (contractionary) with rising (falling) GDP and falling (rising) prices. The length of expansions and contractions is determined by the size and duration of shifts in AD and AS. We can see the history of U.S. business cycle fluctuations by going to National Bureau of Economic Research's US Business Cycle Expansions and Contractions page. This will provide historical data on U.S. business cycles.

The table gives the length (in months) of contractions and expansions. Bold italic numbers are associated with wartimes. Use the information in the table to answer the following questions:

Questions

  1. What dates are associated with the longest and shortest contraction on record?
  2. What dates are associated with the longest and shortest expansion on record?
  3. Are data on the periods of expansion or contraction in output sufficient to identify whether the periods are dominated by AD shifts or AS shifts? What else would you have to know?




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