Eco 302. Name_______________________________. Problem Set 5. 28
September 2011. Mishkin, chapter 8. Business Cycles. 1. What are business
cycles?
Eco 302 Problem Set 5
Name_______________________________ 28 September 2011
Mishkin, chapter 8 Business Cycles 1. What are business cycles? What are the four parts of a business cycle?
2. Distinguish between procyclical and counter cyclical economic variables.
3. What were the "Great Inflation" and the "Great Moderation"?
4. How do macroeconomists distinguish between flexible and sticky prices and wages?
5. Consider the information given in the following table to answer the following questions. Assume the business cycle is entirely determined by changes in real GDP:
Date January February March April May June
Real GDP (billions of $) 10,100 10,500 9,850 9,250 9,950 11,200
Unemployment (%) 4.5 4.7 5.2 5.9 6.3 6.1
Inflation (%) 3.4 3.6 3.8 4.0 3.7 3.5
a. Identity the peak and trough during this period.
b. Comment on the timing of the inflation rate and the stock prices index.
Stock Prices Index 8,800 8,400 8,000 8,600 9,300 10,100
