Baylor University
ECO 3355 AP Macro Topic 2.7 Business Cycles
Part 1: Practice- Use letters on the
graph to identify the following:
1. Peak
2. Expansion/Recovery
3. Trough
4. Full employment
5. Contraction/Recession
Part 2: Check Your Understanding- The Federal Open Market Committee (FOMC) is made up of
economists that analyze the U.S. economy and make po
...[Show More]
Part 1: Practice- Use letters on the
graph to identify the following:
1. Peak
2. Expansion/Recovery
3. Trough
4. Full employment
5. Contraction/Recession
Part 2: Check Your Understanding- The Federal Open Market Committee (FOMC) is made up of
economists that analyze the U.S. economy and make policy decisions to achieve specific goals. Read
the excerpt from the committee’s January 2018 meeting and answer the questions.
“Information received [since December] indicates that the labor market has continued to
strengthen and that economic activity has been rising at a solid rate. Gains in employment,
household spending, and business fixed investment have been solid, and the unemployment rate
has stayed low. On a 12-month basis, both overall inflation and inflation for items other than food
and energy have continued to run below 2 percent. Market-based measures of inflation
compensation have increased in recent months but remain low; survey-based measures of
longer-term inflation expectations are little changed, on balance.
Consistent with its statutory mandate, [this] Committee seeks to foster maximum employment and
price stability. The Committee expects that, with further gradual adjustments in the stance of
monetary policy, economic activity will expand at a moderate pace and labor market conditions
will remain strong. Inflation on a 12-month basis is expected to move up this year and to stabilize
around the Committee’s 2 percent objective over the medium term. Near-term risks to the
economic outlook appear roughly balanced, but the Committee is monitoring inflation
developments closely.
...the Committee will assess realized and expected economic conditions relative to its objectives
of maximum employment and 2 percent inflation. This assessment will take into account a wide
range of information, including measures of labor market conditions, indicators of inflation
pressures and inflation expectations, and readings on financial and international developments.
The Committee will carefully monitor actual and expected inflation developments relative to its
symmetric inflation goal.”
6. According to this committee of economists, the U.S. economy is most likely where on the business
cycle? Identify at least three words or phrases from the press release to support your conclusion.
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