### Chapter 3

```Chapter 3
Cycle
Measurement
Chapter 3 Topics
• Regularities in GDP fluctuations.
• Comovement
• Behavior of Key Macroeconomic Variables
3-2
Regularities in GDP
Fluctuations
real GDP.
• The turning points in the deviations of real GDP
from trend are peaks and troughs.
• Persistent positive deviations from trend are
booms and persistent negative deviations from
trend are recessions.
3-3
Cycles
3-4
Deviations From Trend in
Real GDP are Irregular
• The fluctuations in GDP about trend are quite
choppy.
• There is no regularity in the amplitude of
fluctuations in real GDP about trend.
• There is no regularity in the frequency of
fluctuations in real GDP about trend.
3-5
Figure 3.2 Percentage Deviations from
Trend in Real GDP from 1947–2006
3-6
Figure 3.3 Time Series Plots
of x and y
3-7
Figure 3.4 Correlations
Between Variables y and x
3-8
Correlation With Real GDP
• If the deviations from trend in a macroeconomic
variable are positively (negatively) correlated
with the deviations from trend in real GDP, then
that variable is procyclical (countercyclical).
• If a macroeconomic variable is neither
procyclical nor countercyclical, it is acyclical.
3-9
Figure 3.5 Imports and GDP
3-10
Figure 3.6 Scatter Plot of
Imports and GDP
3-11
Lagging Variables
3-12
Figure 3.8 Percentage Deviations from Trend in
Real GDP (colored line) and the Index of Leading
Economic Indicators (black line) for 1959–2006
3-13
Behavior of Key
Macroeconomic Variables
• Components of GDP: consumption and
investment.
• Nominal variables: price level and money
supply.
• Labor market variables: employment, real wage,
average labor productivity.
3-14
Figure 3.9 Percentage Deviations from
Trend in Real Consumption (black line) and
Real GDP (colored line) 1947–2006
3-15
Figure 3.10 Percentage Deviations from
Trend in Real Investment (black line) and
Real GDP (colored line)
3-16
Figure 3.11 Scatter Plot for the Percentage
Deviations from Trend in the Price Level (the
Implicit GDP Price Deflator) and Real GDP
3-17
Figure 3.12 Price Level and
GDP
3-18
Figure 3.13 Percentage Deviations from Trend
in the Money Supply (black line) and Real GDP
(colored line) for the Period 1959–2006.
3-19
Figure 3.14 Percentage Deviations from
Trend in Employment (black line) and
Real GDP (colored line)
3-20
Figure 3.15 Percentage Deviations from Trend
in Average Labor Productivity (black line) and
Real GDP (colored line) for 1948–2006
3-21
for the Years 2001–2006
3-22
Table 3.1 Correlation Coefficients and
Variability of Percentage Deviations from
Trend
3-23
Table 3.2 Summary of
3-24
Figure 3.17 Percentage Deviations from
Trend in Real GDP and Government
Expenditures
3-25
Figure 3.18 Scatter Plot of Government
Expenditures Against Real GDP
3-26
Figure 3.19 Percentage Deviations
from Trend in Real GDP and Exports