REVIEW QUESTIONS
1. Draw a diagram showing the phases and turning points of a business cycle. Using the diagram, illustrate the concepts of recurrence and persistence.
2. What is comovement? How is comovement related to the business cycle facts presented in this chapter?
3.
If you were a member of the NBER business-cycle dating committee, would you declare that the U.S. economy is now in a recession? Why? Describe the major variables that you would look at to determine whether the economy is in a recession or not, and what features of the data you would look for.4. What terms are used to describe the way a variable moves when aggregate economic activity is rising or falling? What terms are used to describe the timing of cyclical changes in economic variables?
5. If you knew that the economy was falling into a recession, what would you expect to happen to production during the next few quarters? To investment? To average labor productivity? To the real wage? To the unemployment rate?
6. When a recession occurs, do economists expect it to be temporary? Or is there some degree of permanence? What is the empirical evidence for this?
7. What are the two components of a theory of business cycles?
8. How do Keynesians and classicals differ in their beliefs about how long it takes the economy to reach long-run equilibrium? What implications do these differences in beliefs have for Keynesian and classical views about the usefulness of antirecessionary policies? About the types of shocks that cause most recessions?
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