Answer to Question #235566 in Macroeconomics for Ross

Question

What are the four major phases of the business cycle? How long do business cycles last? How do seasonal variations and secular trends complicate measurement of the business cycle? Why does the business cycle affect output and employment in durable goods industries more severely than in industries producing non-durables?

Answer 1

(a) phases of the business cycle

• Expansion
• Peak
• Contraction
• Trough

(b) The duration of business cycles is about 2 to12 years, but most cycles have an average of 6 years in length.

(c) Seasonal variations and secular trends complicate the measure of business cycle such that people are caught unaware and are not prepared for the shift in the cycle since the cycle is unexpected.

(d)

The business cycle has an effect on the output and employment in durable goods industry than on non durable goods due to less decline in quality and quantity of purchases of non durable goods which is not as much as the decline in purchases of durable goods.